The Macro View on
Micro Units
The Urban Land Institute Multifamily Housing Councils were awarded a ULI
Foundation research grant in fall 2013 to evaluate from multiple perspectives
the market performance and market acceptance of micro and small units.
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The Macro View on Micro Units
Acknowledgments
The Multifamily Research Committee wishes to
thank ULI for creating ULI Grants and funding
the research effort to provide hard data to inform
ULI members and the industry at large about the
performance, market acceptance, and current best
practices of small and micro units. In addition, the
committee thanks Mary Ann King, president of
Moran and Company, for serving as its unofficial
adviser and invaluable resource regarding internal
ULI processes and for simply being available to
answer any questions that arose over the course of
the committee’s work.
The committee especially thanks Equity Residential, Flaherty & Collins, Milestone Management,
Riverstone Residential, and UDR for enabling it
to conduct a comprehensive consumer survey of
residents in properties owned or managed by these
companies. Moreover, the committee acknowledges
and thanks the companies that were interviewed
for the purpose of obtaining developer and operator
experience with small and micro units, including
Holland Partner Group, JBG Companies, Panoramic
Interest, Stage 3 Properties Inc., TCA Architects,
Perkins Eastman, Village Green, and Waterton
Residential. Without the generous cooperation and
sharing of information, this research project would
not have been possible.
Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Definition of Micro Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Research Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Historical Market Performance . . . . . . . . . . . . . . . . 8
Product Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Occupancy Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Rental-Rate Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Performance of Properties with Units Less Than 500 Square Feet . . . . . . 12
Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Consumer Feedback . . . . . . . . . . . . . . . . . . . . . . . . 16
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Best Practices and Lessons Learned . . . . . . . . . . . . . 22
Target Market Audiences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Purchase and Rent Motivations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Selling Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Ideal Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Micro-Unit Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Amenity and Gathering-Space Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
General Design Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Kitchen Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
What’s Next—Micro Suites? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Location, Location, Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Marketing and Branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Cautious Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Case Study Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Research Committee Members . . . . . . . . . . . . . . . 38
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
The Macro View on Micro Units
3
Executive
Summary
ments, what do they like and dislike, and what
motivated them to consider a micro unit in the
first place?
n W
hat would motivate potential renters of conventional apartments to live in a smaller unit?
n B
ased on a compilation of all of the above, what is
the likely future for micro units; is this a passing
fad or a growing trend?
A
common perception exists that unit sizes in new
apartments have been shrinking as developers
seek higher density and higher revenue per square
foot to offset rising land value and construction costs
and to hold monthly rent at an affordable level relative
to income. The ultimate incarnation of this trend has
been the introduction—or the reintroduction—of very
small units, often referred to as micro units. These very
small (by traditional standards) apartments, leasing at
approximately 20 percent to 30 percent lower monthly
rent than conventional units, yet at very high value
ratios (rent per square foot), have been offered or are
being considered in urban and urbanizing locales, particularly high-density, expensive metropolitan markets
such as Boston, New York, San Francisco, Seattle, and
Washington, D.C. This research report explores this renewed trend in the United States and seeks to answer
the following key questions:
n W
hat exactly is a micro unit?
n H
ow have smaller and micro-unit rental apartments performed in the marketplace compared
with larger, more conventional apartments?
n D
oes the higher per square foot rent justify the
higher construction cost?
n What
are some of the examples across the
country where micro units have been successfully
developed and operated?
n W
hat are the critical success factors and lessons
learned from developers, owners, operators, and
design professionals that have experience with
this new breed of micro-unit community?
n What
has been the experience of residents who
have actually lived in one of these tiny apart-
4
To answer these and other questions, the research
team for this report analyzed hard data to understand
the performance of smaller and micro units in the
marketplace. The team also conducted consumer
research with residents of micro units to understand
their experience and satisfaction levels compared
with occupants of conventional units. Finally, the
team compiled case studies of micro-unit rental
apartment communities and conducted a series of
interviews with industry experts to identify best practices and lessons learned. The ultimate objective of
this research is to gather and share innovative ideas
that can contribute to the successful development of
micro-unit communities in the future.
Some of the key findings, which the report provides
in greater detail, follow:
n A
lthough micro unit has no standard definition, a
working definition is a small studio apartment,
typically less than 350 square feet, with a fully
functioning and accessibility compliant kitchen and
bathroom. Under this definition, a 160-square-foot
single-room-occupancy (SRO) unit that relies upon
communal kitchen or bathroom facilities does not
qualify as a true micro unit.
n S
maller and micro units outperform conventional
units in the marketplace—they achieve higher occupancy rates and garner significant rental-rate
premiums (rent per square foot) compared with
conventional units. However, the stock of very
small units is still quite limited, and it is difficult to know whether the performance of these
smaller units is driven by their relative scarcity
or whether significant pent-up demand for micro
units actually exists.
n B
oth the consumer research and the case studies
indicate that a segment of renters is indeed interested in the micro-unit concept; nearly a quarter
of renters in conventional apartments indicate they
would be interested or very interested in renting
a micro unit. Depending upon one’s perspective,
The Macro View on Micro Units
either this speaks to a potentially huge untapped
market, or it remains a niche market.
n The appeal of micro units is largely about economics, but place and privacy are all part of the
equation. Most respondents interested in micro
units are willing to consider them in exchange for a
lower monthly rent (approximately 20 percent to 30
percent below that of a conventionally sized unit), a
highly desirable (typically authentic, urban/urbanizing, walkable, trendy) location, and the ability to
live alone.
n T
he target market profile for micro units is predominantly young professional singles, typically
under 30 years of age, with most under 27 years
of age, trending slightly more male than female.
Secondary segments include some couples and
roommates, some older move-down singles, and
pied-à-terre users.
n D
eveloping and operating a rental apartment
community with micro units are more expensive,
but the premium rent per square foot achieved
more than makes up for the added cost.
n Developers and design professionals have
come up with a number of creative solutions
that ensure micro units are compliant with
Fair Housing Amendment Act and accessibility
requirements, livable, and actually feel larger
than they really are. Such items include flexible
furniture systems, high ceilings (more than nine
feet), oversized windows, built-in storage, gadget
walls, and movable kitchen islands.
Definition of Micro Unit
What exactly qualifies as a micro unit? A micro unit
might be 300 square feet in New York City or 500
square feet in Dallas. This study learned that no
standard definition exists. A micro unit is a somewhat ambiguous term that covers anything from a
relatively small studio or one-bedroom apartment to
a short-term lease, SRO unit with communal kitchen and common room areas. In fact, many in the
industry are moving away from branding their units
as micro because the term has begun to arouse negative connotations associated with higher density,
overcrowding, and transient populations.
In New York City and Philadelphia, the minimum
size requirement for a new dwelling unit is 400
square feet. However, former New York City mayor
Bloomberg waived this requirement for the adAPT
NYC competition, which defined micro apartments
as studio apartments that range between 275
and 300 square feet and include fully functioning
kitchens and accessible bathrooms. In the city of
San Francisco, new legislation was passed allowing
apartments as small as 220 square feet, so long as
70 square feet of this space is allocated to a bathroom and kitchen.
In the District of Columbia, the minimum size for
an apartment is also 220 square feet but with no
prescription regarding allocation of space within the
unit. In Boston, the minimum size for a dwelling unit
The size of what
qualifies as a micro unit
is determined by the
market in which it exists.
An average micro unit
on the East and West
Coasts, such as those
proposed in the adAPT
NYC competition, can
be around 300 square
feet (top), but in some
Midwestern and Texas
markets, units, such as
those designed by Urban
Studio, can range between
400 and 500 square feet
(bottom).
CURBED NY “MICRO DWELLINGS”
(TOP); IDEABOX (BOTTOM)
n Rental apartment communities with micro units
also emphasize what is outside the confines of
the unit itself. Developers tend to offer an extensive array of amenities, intimate gathering spaces, and services to residents that enable them to
experience community outside their micro unit.
n A definite shift has taken place toward a greater
mix of smaller studio and one-bedroom apartments, and micro units are a growing trend across
the country with a number of communities under
construction and many more in the planning
stages. However, to hedge their bets, some savvy
developers are building in the flexibility to convert
side-by-side micro units back into conventional
one- and two-bedroom units, just in case the
concept is a flash in the pan.
The Macro View on Micro Units
5
In another perspective,
micro units are larger
than a one-car garage but
smaller than a two-car
garage.
DECOSOUP
is 450 square feet within
one mile of public transit,
but again this requirement
was waived for a demonstration project in the Innovation District to allow development of smaller units.
In some Midwestern and
Texas markets, units ranging between 400 and 500
square feet are described
as micro units. Seattle and
Portland have no minimum
size requirements, which
probably explains why these
markets are two of the best
examples of cities demonstrating a tremendous
amount of experimentation with very small units,
including a wide range of
communities offering SROs
and micro units.
Thus, the concept of micro units is to some degree
relative to the market in which they exist. For the purposes of this research effort, a distinction was made
between SRO units and micro-unit apartments with
fully functioning kitchens and bathrooms. Although
some trading range probably exists in the square
footage depending upon the market, a good definition
of a micro unit is a purpose-built, typically urban, small
studio or one-bedroom using efficient design to appear
larger than it is and ranging in size from as little as 280
square feet up to as much as 450 square feet (which
roughly equates to 20 percent to 30 percent smaller
than conventional studios in a given market). Many micro units under 350 square feet feature built-in storage
units and flexible furniture systems (e.g., Murphy beds,
hideaway kitchen modules, convertible tables, and so
on) to make these smaller spaces work.
To put the size of a micro unit into perspective, a
300-square-foot micro-unit studio apartment is
slightly larger than a one-car garage but considerably smaller than a two-car garage.
Approach
n M
arket performance—MPF Research, a division of RealPage Inc., took a data-driven look at
performance metrics of small and micro units (as
available), including rents, value ratios, and occupancy, compared to conventionally sized units. This
analysis examined key characteristics of apartments completed during 2012–2013 in significant
construction centers across the United States,
documenting the evolution of typical unit size and
mix compared to the product built previously. In
addition, variations in occupancy and rent achievement performance are compared across unit size
and floor plan categories to determine whether
small units (not just micro units) have outperformed
or underperformed other unit types in occupancy
and rent rate premiums.
n C
onsumer research—Kingsley Associates conducted the apartment resident survey portion of this
research to ascertain attitudes toward smaller and
micro units by both conventional apartment renters
and current micro-unit renters. The survey examined what interior, common area and neighborhood
amenities, and locational conveniences would drive
residents’ decisions to rent a small or micro unit
over other options; what amenities actually matter
most to consumers when making the choice of
where and what to rent; and what tradeoffs they
would be willing to make in deciding to rent a small
or micro unit.
n B
est practices and lessons learned—RCLCO
(Robert Charles Lesser & Co.) interviewed ULI
Multifamily Council member participants and other
developers, operators, and design professionals to
obtain feedback on their experience and innovative
ideas (both tested or under consideration) regarding
micro units to shape and inform the debate. This
input was also used to shape the survey instrument
used in the consumer research component of this
report previously described. RCLCO also conducted
a series of case studies of existing rental apartment
communities that had micro units. From this effort,
RCLCO prepared a summary of best practices
and lessons learned with smaller and micro units,
including unit features and finishes, community
amenities and services, locational characteristics,
operating experience, and construction and operational costs.
This study evaluates the market performance and
market acceptance of small and micro units from
multiple perspectives, including the following:
6
The Macro View on Micro Units
Research
Partners
T
he Multifamily Research Committee enlisted the
services of MPF Research, Kingsley Associates,
and RCLCO as research partners for this project. A
brief corporate biography of each of these partners
follows.
MPF
A division of RealPage, MPF Research has been
providing apartment market trends and objective
insights to the multifamily industry since 1961. With
exclusive access to a completely unique data source
and a solid foundation of sound statistical methodologies, MPF Research publishes 72 individual apartment market reports covering the top 100 markets
nationally. MPF is relied upon to formulate and finetune business strategies in a variety of multifamily
industry specialties, including investment, operations, and development. Visit the company website
at www.realpage.com/mpf-research for additional
information.
Kingsley Associates
Since 1985, real estate leaders have turned to
Kingsley Associates to maximize their portfolio
and organizational performance. With a depth and
breadth of insight unmatched in the industry, Kings­
ley Associates is a leader in resident and tenant
satisfaction surveys, client perception studies, employee engagement surveys, strategic consulting,
and operations benchmarking. Learn more at
www.kingsleyassociates.com.
RCLCO
Since its founding in 1967, RCLCO has been at
the leading edge of real estate trends and issues,
offering strategic guidance that is market-driven,
analytically based, and financially sound. RCLCO’s
multidisciplinary team combines real-world experience with the analytical underpinnings drawn from
thousands of consulting engagements and proprietary research to develop and implement plans that
strengthen our clients’ position in their markets, at
every point in the market cycle. Visit the company
website at www.rclco.com for addtional information.
The Macro View on Micro Units
7
Historical
Market
Performance
totaled some 90,000 units in more than 400 properties, representing 41 percent of all units delivered in
2012–2013 in these 35 metros.)
To understand how product design has evolved, MPF
compared characteristics of the newest generation
of apartments with (a) those of properties built a decade earlier, in 2002–2003 (based on 920 properties
with 220,000 units), and (b) those built in 2008–2009
(950 properties with 232,000 units), which represent
the tail end of the last development cycle before
the Great Recession briefly brought construction of
conventional market-rate apartments to a virtual
standstill. (All figures in this section are courtesy of
MPF Research, Real Page Inc.)
Product Characteristics
T
o assess the market response to very small,
or micro, units, MPF Research examined key
characteristics of apartments completed during
2012–2013 in significant construction centers across
the United States and documented the evolution of
typical unit size and mix compared to the product
built in previous cycles. MPF also identified patterns
in occupancy and rent achievement across unit size
and floor plan categories.
The properties studied were located in the 35 metropolitan areas where U.S. deliveries were concentrated in 2012–2013; these metros accounted for 82
percent of all apartment product built in the nation’s
100 biggest markets during this two-year period.
(The specific communities included in the analysis
Average Unit Size by Region (Three Development Cycles)
1,050
1,028
1,000
Square feet
972
950
900
998 995
967
939
914
1,021
1,011
963
937
954
950
919
896
850
800
Midwest
Northeast
2012–2013
8
South
2008–2009
West
U.S.
2002–2003
Confirming the general perception that exists in the
industry, typical unit size has been shrinking. This
shift is not as pronounced as some might think and,
as discussed later, the key driver behind shrinking
average unit size does not necessarily align with
conventional wisdom.
The average unit size for the nation’s 2012–2013
completions registers at 950 square feet, which is
almost 50 square feet less than the norms recorded
in 2002–2003 (995 square feet) and 2008–2009 (998
square feet).
Metros in the South and West regions of the United
States accounted for the biggest portions of supply
completed in each period examined and most clearly
illustrate the general trend toward smaller average unit size. Apartments built in the South during
2012–2013 average 967 square feet, compared
with norms of 1,021 square feet for the 2002–2003
deliveries and 1,011 square feet for 2008–2009
completions. In the West, average unit size is down
to 919 square feet, falling from norms of 954 square
feet in the 2002–2003 stock and 963 square feet in
2008–2009’s new supply.
With less new product delivered across the Midwest
and Northeast regions, the evolution of average unit
size there is less clear-cut. In the Midwest, average
size for the most recent round of completions comes
in at 914 square feet, smaller than the 2002–2003
deliveries but a little bigger than in 2008–2009 additions. In the Northeast, unit size for 2012–2013 deliveries averages 939 square feet, virtually unchanged
from the 2002–2003 standard but down drastically
The Macro View on Micro Units
Bedroom Type by Development Cycle, United States
6.0%
10.4%
10.6%
3.2%
13.6%
45.4%
44.8%
41.1%
38.5%
1 bedroom
39.2%
45.4%
2012–2013
Studio
2002–2003
2008–2009
2 bedrooms
1.8%
3+ bedrooms
from the figure recorded in 2008–2009. The very
large units built in the Northeast during 2008–2009
appear out of line with other point-in-time readings, perhaps influenced by the possibility of sale as
condominiums.
The dominant influence behind the general trend
toward smaller average unit size is a shift in the mix
of unit types. Studio and one-bedroom units account
for 50.9 percent of the 2012–2013 completions,
marginally higher than 2008–2009’s 48.6 percent
share but up drastically from 2002–2003’s norm of
41.0 percent. Clearly driving the move toward more
studio and one-bedroom units, the share of 2012–
2013’s new supply in urban core settings—downtown or downtown-adjacent locales—is significantly
higher than the urban core’s share in 2008–2009
or 2002–2003. Because singles living alone and
couples or roommate households dominate the
apartment-resident base in the typical urban core
environment, building product that features more
studio and one-bedroom units simply makes sense.
Over the course of the past decade, the share of deliveries in two-bedroom configuration has declined
to 38.5 percent from 45.4 percent. And for units with
three or more bedrooms, 2012–2013 completions
came in at 10.6 percent of the additions, down from
13.6 percent ten years earlier.
The shift in unit-type emphasis will be interesting
to watch over the next phase of the current development cycle. While near-term completions of
urban core properties will continue to be disproportionately heavy relative to the historical norm, the
suburbs are increasingly seeing recent starts and
thus anticipate 2015–2016 completions. However, the jump in suburban construction does not
necessarily translate to a shift back toward larger
units. New suburban product in this cycle also tends
to be focused in higher-density neighborhoods
that are hubs for employment, transportation, or
entertainment. Thus, a sizable percentage of studio
and one-bedroom units is appropriate for this style
of suburban project. In addition, developers are not
surprisingly backing away from units with three or
Building Type by Development Cycle, United States
8.9%
15.5%
13.8%
20.6%
50.9%
70.4%
50.8%
35.3%
33.7%
2012–2013
Low rise
Mid rise
2008–2009
2002–2003
High rise
The Macro View on Micro Units
9
Occupancy by Unit Size (2012–2013 Development Cycle), United States
98%
Less than 600 sf
96.1%
96%
94%
More than 1,000 sf
92.7%
92%
90.1%
90%
88%
600 –1,000 sf
87.4%
86.7% 87.1%
89.9% 89.5%
90.5% 90.2%
89.9%
91.3%
89.6% 89.3%
87.9%
86%
84%
82%
80%
Midwest
Northeast
South
more bedrooms to an even greater degree in suburban settings, ceding families with children to the
single-family-home rental sector.
Illustrating that current development is focused
on high-density urban core settings or medium- to
high-density suburban hubs, the share of deliveries
found in mid-rise and high-rise buildings has surged
during the past decade. (MPF Research defines
high-rise projects as those with seven or more
stories. For mid-rise buildings the height is four to
six stories, with low-rise properties totaling one to
three floors.) Mid- and high-rise buildings account
for 49.1 percent of 2012–2013’s completions—twothirds higher than the 29.6 percent share a decade
earlier. The shift toward higher density was already
occurring by the end of the building cycle that ran
from the late 1990s through 2009, as the mid- or
high-rise share of 2008–2009 product almost
matched the most recent wave of new supply.
Perhaps surprising is that the industry is reducing
average unit size by increasing the mix of smaller
studio and one-bedroom units, rather than by decreasing floor plan sizes. The typical one-bedroom
unit is shrinking today, but the shift is not drastic.
The average size for a one-bedroom apartment in
2012–2013 completions is 763 square feet, compared with 779 square feet a decade ago and 800
square feet on average in 2008–2009. Average
unit sizes for studios (now at 545 square feet) and
two-bedroom units (now at 1,104 square feet) do
not show any distinct trend across the three periods
studied.
10
West
U.S.
In contrast, units with three or more bedrooms are
getting larger. The average three-bedroom unit
is now 1,410 square feet, increasing from 1,377
square feet in 2008–2009 and 1,329 square feet in
2002–2003, perhaps targeting a growing number of
downsizing baby boomers.
Occupancy Performance
In general, smaller units enjoy higher overall occupancy rates.
Small units with less than 600 square feet were
the top occupancy performers in recently finished
developments as of early 2014. These units reported
noticeably higher occupancy (91.3 percent) than the
89.6 percent rate for mid-sized units from 600 to
1,000 square feet and the 89.3 percent in large units
of more than 1,000 square feet.
Although early 2014 occupancy was strongest in
the small-unit segment across every part of the
country, the premium did not reach meaningful
levels in the West or Midwest. The biggest premium
registered in the Northeast, where occupancy in
small units outperformed mid-sized units by 600
basis points and large units by 820 basis points.
Important to remember, however, is that those units
in the Northeast do not account for a large share of
the nation’s total stock added in 2012–2013. More
significant in boosting the country’s overall occupancy premium for smaller units, then, was the
advantage for these units in the construction-heavy
southern region. Small units built in the South
The Macro View on Micro Units
Occupancy by Detailed Unit Size (2012–2013 Development Cycle), United States
92.0%
91.5%
91.5%
91.0%
91.1%
90.5%
90.5%
90.3%
89.9%
90.0%
90.0%
89.7%
89.5%
88.9%
89.0%
88.6%
88.5%
88.0%
Less than
500 sq ft
500–599
sq ft
600–699
sq ft
700–799
sq ft
800–899
sq ft
during 2012–2013 were 92.7 percent full as of early
2014. That performance topped the occupancy rate
for the region’s mid-sized units by 380 basis points
and surpassed the occupancy norm for large units
by 420 basis points.
In more fine-grained unit-size categories, the most
significant premiums registered among units smaller than 500 square feet (91.1 percent occupied), in
the 500- to 599-square-foot range (91.5 percent
occupied), in the 900- to 999-square-foot segment
(90.1 percent occupied), the 1,000- to 1,099-squarefoot range (90.0 percent occupied), and the 1,200- to
1,299-square-foot category (90.5 percent occupied).
It is perhaps tempting to make pronouncements regarding popularity of units in various size segments
based on those occupancy rates. In particular, on
the surface the smallest units seem to be the rock
stars. In fact, however, a strong relationship tends
to exist between occupancy performance and the
absolute number of units in that unit-size segment:
the fewer the number of units built in any category,
the higher the occupancy rate in that niche. For
example, units of less than 500 square feet represent only 2.7 percent of the 2012–2013 completions
studied, and the 500- to 599-square-foot segment is
just 5.2 percent of the spectrum.
If a particular size niche is an outperformer for
occupancy, it is the 1,000- to 1,099-square-foot
category, given that segment constitutes a comparatively hefty 14.0 percent of the entire stock studied.
This product may appeal to roommates who are also
seeking affordable monthly rent (just as very small
units offer smaller monthly rents).
The Macro View on Micro Units
900–999
sq ft
88.4%
1,000–
1,100–
1,200–
More than
1,099 sq ft 1,199 sq ft 1,299 sq ft 1,299 sq ft
Rental-Rate Performance
Communities completed in 2012–2013 achieved
effective rents for new leases of $1.684 per square
foot as of early 2014. This pricing represented an 11
percent premium over rates of $1.576 per square
foot for the 2008–2009 vintage stock and a 22 percent premium over pricing of $1.383 per square foot
for the inventory built in 2002–2003.
The smaller unit size of the newest product would
typically achieve higher rent per square foot,
explaining a portion of these premiums in average
rent per square foot. However, the current pricing
premium for 2012–2013 vintage units of less than
600 square feet is especially sizable. Typical rents of
$2.647 in these small units top the rates of units in
the 600- to 1,000-square-foot category by 54 percent
and exceed the pricing of units of more than 1,000
square feet by 81 percent.
The most notable pricing premium for small units is
seen in the Northeast region. In that part of the country, square-foot pricing for units below 600 square
feet tops the rates for mid-sized units by 97 percent
and surpasses large-unit rents by 174 percent. Again,
the inventory of new units in the Northeast (and in the
Midwest) is fairly small and vulnerable to big variation
when making comparisons.
More statistically significant, then, are the premiums seen in the South and West, which have many
more new-generation projects. In the South, units
less than 600 square feet achieve price premiums
of 40 percent over mid-sized units and 56 percent
over large units. In the West, price premiums for
11
Rent per Square Foot by Unit Size (2012–2013 Development Cycle)
$6
$5.355
Less than 600 sf
600–1,000 sf
More than 1,000 sf
$5
$4
$3
$2.230
$2
$2.916
$2.724
$1.871
$1.958
$2.141
$2.046
$1.525
$1.525
$2.647
$1.723
$1.618
$1.369
$1.459
$1
$0
Midwest
Northeast
South
West
U.S.
2002–2003 are found in the Northeast generally
and New York specifically, where pricing is higher
relative to other locales across the country.
small units reach 43 percent over their mid-sized
counterparts and a whopping 80 percent over the
large units.
By comparison to earlier completions, the smallunit premium is substantial in the 2008–2009 stock
but not as big as in the newest units. In contrast,
small units from 2002–2003 command gigantic
price premiums over larger models. On the surface,
these decade-old small units are getting rents that
exceed pricing for the newest small units as well
as those from 2008–2009. The reason behind those
huge rents for small units built in 2002–2003 lies in
geography. An outsized share of the tiny units from
Performance of Properties
with Units Less Than 500
Square Feet
Digging deeper into the performance of the smallest
units now offered in the U.S. apartment market,
MPF Research specifically analyzed properties completed in 2012–2013 with at least some units of sizes
less than 500 square feet.
Rent per Square Foot by Unit Size (Three Development Cycles), United States
$3.20
Less than 600 sf
$2.70
More than 1,000 sf
$2.74
$2.65
$2.23
$2.20
$1.70
600–1,000 sf
$1.72
$1.60
$1.46
$1.37
$1.48
$1.21
$1.20
$0.70
2012–2013
12
2008–2009
2002–2003
The Macro View on Micro Units
Building Type with Units Less Than 500 Square Feet by Development Cycle, United States
8.9%
11.4%
27.2%
57.8%
30.8%
45.5%
2012–2013
Low rise
40.2%
45.6%
Mid rise
32.6%
2008–2009
2002–2003
High rise
Unit Type with Less Than 500 Square Feet by Development Cycle, United States
16.5%
21.8%
16.9%
9.3%
7.1%
4.3%
43.6%
50.1%
42.9%
28.6%
30.6%
28.2%
2012–2013
Studio
1 bedroom
2008–2009
2 bedrooms
3+ bedrooms
Not surprisingly, these units are found almost
exclusively in urban core settings. Nine times out of
ten, these very small units are found in mid-rise and
high-rise buildings, rather than in low-density communities. The exception is that almost 30 percent of
the 2002–2003 buildings with ultra-small units were
low rise in design.
The properties that include any units with less than
500 square feet not surprisingly have overall unit
mixes that are comparatively heavy on studio and
one-bedroom floor plans. Studio and one-bedroom
units constitute 64.7 percent of the total selection in
the 2012–2013 inventory, 60.1 percent in the 2008–
2009 stock, and 67.1 percent in the 2002–2003 mix.
In these 2012–2013 completions that have apartments under 500 square feet in size, small units are
the top occupancy performers. Units that meet the
broader “small” designation of less than 600 square
feet were 90.3 percent occupied as of early 2014,
compared with occupancy rates of 88.1 percent in
The Macro View on Micro Units
2002–2003
the mid-sized units of 600 to 1,000 square feet and
87.3 percent in the large units of more than 1,000
square feet.
The early 2014 occupancy premium for small units
registered primarily in the South and Midwest regions, with minimal differences in occupancy by unit
size posted across the Northeast and the West.
In developments that offer very small units, these
sub-500-square-foot models ranked among the
top achievers as of early 2014. Not only were these
ultra-small units 91.1 percent occupied, but they
also comprise a significant 19.8 percent of the total
mix in this sample set. For slightly larger units of
500 to 599 square feet, early 2014 occupancy was
88.9 percent, with that segment accounting for 11.2
percent of the total mix.
A comparable occupancy level (91.1 percent) was
also seen in units of 900 to 999 square feet, with
marginally smaller or larger models also more than
89 percent full. Units of 800 to 899 square feet ac-
13
Occupancy by Unit Size for Properties with Units Less Than 500 Square Feet
(2012–2013 Development Cycle), United States
100%
97.3% 96.9%
98.6%
95%
Less than 600 sf
600–1,000 sf
More than 1,000 sf
92.9%
89.6% 89.8%
90%
89.3% 89.4%
90.3%
88.1%
87.8%
87.3%
85%
81.8%
80%
75%
70%
74.7% 74.5%
Midwest
Northeast
South
counted for 12.3 percent of this product mix, making
the comparatively high occupancy in those units
meaningful. However, solid occupancy in units of
900 to 999 square feet and 1,000 to 1,099 square feet
likely in part reflected how few of those apartments
are offered.
Among 2012–2013 completions that include units less
than 500 square feet in size, early 2014 effective rents
for new leases averaged $2.989 per square foot in
the units meeting the small designation (under 600
square feet). That’s a 25 percent premium over the
West
U.S.
square-foot rates for mid-sized units of 600 to 1,000
square feet and a 48 percent premium over the pricing for large units of more than 1,000 square feet.
Interestingly, the price premium for small units is
less pronounced within properties that emphasize
this option than is the premium for small units
over the total marketplace. That is a logical result
because, generally, the greater the inventory of any
unit type within a given property, the greater the
number of units that have to be leased and, in turn,
the less aggressive an operator can be on pricing.
Occupancy by Unit Size for 2012–2013 Properties Including Units Less Than 500 Square Feet,
United States
92%
91%
91.3%
91.1%
90%
89.7%
89.0%
88.9%
89%
88%
87.3%
86.9%
87%
86.3%
86.0%
86%
85.4%
85%
84%
14
Less than
500 sq ft
500–599
sq ft
600–699
sq ft
700–799
sq ft
800–899
sq ft
900–999
sq ft
1,000–
1,100–
1,200–
More than
1,099 sq ft 1,199 sq ft 1,299 sq ft 1,299 sq ft
The Macro View on Micro Units
Rent per Square Foot by Unit Size for Properties with Units Less Than 500 Square Feet
(2012–2013 Development Cycle), United States
$6
$5.705
Less than 600 sf
$4.998
$5
$4
600–1,000 sf
More than 1,000 sf
$3.496
$3.001
$3
$2.403
$2.331 $2.381 $2.276
$2
$2.989
$2.524 $2.401
$2.386
$1.759 $1.679
$2.013
$1
$0
Midwest
Northeast
Key Findings
Among the key findings from the historical data are
the following:
n In properties built during the 2012–2013 time
frame, average unit size (950 square feet) is down
nearly 50 square feet from the average recorded
in the previous cycle (both early in that cycle and
late in the cycle).
n Although a tendency exists toward slight downsizing of units in one-bedroom configuration,
the real driving force behind the smaller overall
average unit size is a shift in the mix of floor
plans offered, with more studio and one-bedroom units and fewer two-bedroom units and
apartments with three or more bedrooms. The
shift in unit mix corresponds to a greater share of
development occurring in urban settings, where
household size is smaller.
n A
review of historical data reveals that 2012–2013
completions featuring units less than 500 square
feet are concentrated in mid-rise or high-rise
buildings in urban core settings. Among properties that offer very small units, those specific
The Macro View on Micro Units
South
West
U.S.
units tend to be the top-performing floor plans in
the individual communities. However, the more
small units in the mix at an individual property,
the smaller the performance premium is for
those units.
n T
he smallest units offered in the current generation of product tend to achieve the strongest
occupancy levels and significant rent (per square
foot) premiums over larger floor plans. Small
units thus appear underrepresented in the
inventory relative to demand potential. However,
the total stock of units under 600 square feet
that has been introduced is very limited, making
up less than 8 percent of the current apartment
development cycle’s total supply. Very small, or
micro, units constitute less than 3 percent of the
2012–2013 deliveries. Given this limited number
of units, it is difficult to derive from available data
the viability of moving this product type beyond
niche status.
In the following section, Kingsley Associates has
conducted extensive consumer research that examines and documents consumer sentiment toward
micro units.
15
Consumer
Feedback
For the purposes of gauging potential renter interest in micro units, a simplified unit description was
used along with the same image of a micro-unit
plan shown in previous images.
Micro-unit apartments are a new type of residential
community designed to provide small but affordable
housing in urban areas. These units are typically 20
percent to 30 percent smaller than a conventional
studio apartment and feature compact kitchens and
bathrooms. Innovative installations such as customizable space partitions and convertible furniture are
frequently used to maximize space efficiency.
Living in a micro-unit apartment generally includes
having a single-occupancy unit at a lower cost
K
ingsley Associates conducted consumer research to explore satisfaction with, and attitudes
and preferences toward, micro units. The specific
goal of the assessment was twofold: first, to identify
potential renters’ attitudes and impressions toward
small and micro units as well as factors influencing
the rental decision; and second, to gauge current
micro-unit renters’ opinions regarding their living
experience and initial leasing decisions.
Participants
Two surveys were administered via e-mail to the
two respondent groups of potential and current
micro-unit renters.
The first group of respondents was identified as
potential renters. They are conventional apartment
renters who are not currently living in a micro
unit. With the permission of the apartment owner
or operator, the residents were sent invitations
to participate in the online survey on January 22,
2014, and were able to respond through February
18, 2014. Kingsley Associates distributed surveys to
more than 37,000 conventional-unit renters across
180 apartment communities nationally and received
3,407 responses for a response rate of 9 percent.
Potential renter survey participants provided feedback in the following general survey areas:
n I nitial micro-unit interest;
n D
ecision factors;
n Amenities
(neighborhood, community, and in
unit); and
than comparable studio apartments in the same
neighborhood. To compensate for the smaller unit
size, micro-unit apartments tend to have a stronger
emphasis on shared communal areas in lobbies,
hallways, and rooftops.
The second group of respondents was micro-unit
renters. They are apartment renters currently living
in a micro unit. With the apartment owner’s or operator’s permission, invitations were sent to participate in a separate online survey beginning February
28, 2014, to which they could respond through May
29, 2014. Because micro units are an emerging
product type, the accessibility of micro-unit renters
for research is limited. Kingsley Associates distributed 422 surveys to micro-unit renters across
five different apartment communities identified
in partnership with the ULI Multifamily Research
Committee. Of these surveys, 110 responses were
received for a response rate of 26 percent. Although
more micro-unit communities are under construction, these properties were unavailable to survey at
the time of publishing.
Micro-unit renter respondents answered questions
on the following topics:
n S
atisfaction with micro-unit living experience;
n I nitial leasing decision, including amenities
factors;
n M
icro-unit lifestyle and use;
n Renewal intentions; and
n Demographics.
n D
emographics.
16
The Macro View on Micro Units
Survey Results
Conventional-Renter Interest in Renting a Micro Unit
6%
The complete findings of both surveys are included in the appendix of this report. The following are
highlights of some of the key findings and results
from the research. In addition, where appropriate,
the findings from micro-unit renter responses are
compared to the Kingsley IndexSM for contrast to conventional-renter satisfaction levels and opinions. The
Kingsley Index is a proprietary real estate tenant and
resident opinion database that includes a multifamily
index of data from more than 100 companies, including seven of the ten largest apartment managers.
(All figures in this section are courtesy of Kingsley
Associates.)
31%
18%
Definitely would
Probably would
Unsure
Probably would not
18%
Definitely would not
27%
Potential-Renter Results
as the top indicators of micro-unit interest. For
example, 47 percent of respondents who are single,
under 34 years of age, living with roommates, and
earning less than $40,000 indicated they would
consider renting a micro unit, which is twice the rate
of interest for the entire conventional-unit respondent pool. (Please see the appendix for a detailed
breakdown based on each category.) More generally,
the demographic characteristics of the interested
potential-resident group show that males are slightly more interested than females (26 percent versus
23 percent), single persons living with roommates
(40 percent) are most interested (with singles living
alone the next most favorable reading at 27 percent),
and those under 25 years of age (34 percent) are the
most interested age group.
Results from the survey of potential micro-unit
renters currently living in conventional units revealed
that the majority of respondents (58 percent) were
probably or definitely not interested in renting micro
units, with 18 percent unsure and 24 percent probably
or definitely interested. Those uninterested in a micro
unit most frequently cited lack of a separate bedroom
(75 percent), less storage space (63 percent), and
less living or dining space (60 percent) as the reasons
for their disinterest. Interestingly, similar questions
were asked of current micro-unit renters regarding
their initial leasing decision. A majority of the current
micro-unit renters (82 percent) were not intentionally
looking for a micro unit.
Consumer feedback from best practices research
(in the following chapter) confirms survey responses
received. When focusing on the potentially interested group, age, income, and living situation emerge
Which perceived attributes of a micro unit are most
appealing to potential renters? The survey revealed
that the primary reasons potential renters would
Micro-Unit over Conventional-Unit Trade-off
I would choose a micro unit over a conventional-size apartment unit in exchange for:
Ranking areas
1st- or 2nd-rank mentions
1st-rank mentions
Lower rent compared with conventional studios
73%
53%
Desired location/neighborhood
44%
23%
Reduced utility costs
35%
7%
Ability to live alone (i.e., without roommates)
28%
12%
Shorter commute to work
19%
8%
Minimal apartment upkeep, cleaning, etc.
10%
3%
Neighbors with a similar lifestyle
8%
3%
More community amenities/shared spaces
7%
2%
Proximity to public transportation
6%
3%
The Macro View on Micro Units
17
Importance of Amenities in Rental
Consideration
Neighborhood amenities
Grocery store
88%
Restaurants/bars
68%
Gym
56%
Entertainment
53%
Retail centers
52%
Cafés
49%
Recreation
46%
Public transit
41%
Community amenities
18
Percent 4s and 5s
Laundry room
83%
Assigned parking
72%
Visitor parking
72%
Fitness center
70%
Roof/outdoor space
62%
Pool
56%
Living room area on each floor
43%
Grill
43%
Business center
30%
Pet services
29%
Central lounge
26%
Bike rack
23%
Cinema room
20%
Communal kitchen
19%
Car rental
14%
Unit amenities
Note: Importance ranked
on a scale of 1 (least) to 5
(most) important.
Percent 4s and 5s
Percent 4s and 5s
Washer and dryer
86%
Built-in closet/drawers
82%
Storage space
81%
Full-size refrigerator
77%
Full-size kitchen sink
75%
Four-burner stove
75%
Dishwasher
71%
Bathtub
61%
Space partitions
53%
High ceilings (9 feet+)
49%
Oversized windows
49%
Flat-screen television
42%
Juliet balcony
41%
choose a micro unit over a conventional-size unit
are lower rent (and utility costs), desired location,
and ability to live alone.
Regarding cost, respondents largely expect ­microunit rent to be 21 percent to 30 percent lower than
for a comparable studio. This is not too far from the
25 percent to 30 percent rent reduction obtained
from the best practices effort in the next section, as
well as in line with the original micro-unit definition.
As to which micro-unit qualities made potential
renters most hesitant, the wide majority cited the
perceived lack of storage.
With reduced unit space, surrounding amenities are
an especially important consideration for potential
micro-unit renters. Conventional-unit respondents
assessed the importance of various types of amenities
(neighborhood, community, and in unit) that would
matter most to them if living in a micro unit. Across
all the different types of amenities, the following were
rated as important by over 80 percent of respondents:
proximity to a grocery store, in-unit washer and dryer
or community laundry room, and in-unit storage space
(such as built-in closets and drawers).
Surprisingly, regarding in-unit furnishings, only
30 percent of respondents reported they would
be interested in a fully furnished unit, though 55
percent would be interested in multifunctional
furniture (e.g., a bed that converts to a table or a
couch that converts to a bed). Perhaps market participants should strike a balance between providing
well-designed multifunctional furniture without fully
furnishing the unit.
Results for Micro-Unit Renters
As previously mentioned, the micro unit is an
emerging product type. The accessibility of microunit renters for research was extremely limited.
­Given the relatively small data set of micro-unit
renter responses (110 responses from five communities), these results may not be nationally representative. Nonetheless, the response rate for the
micro-unit renters was high compared with that of
the conventional-unit renters.
The survey distributed to micro-unit residents aimed
to measure satisfaction levels with the current living
experience as well as their decision-making process
and resident lifestyles. The majority of the micro-unit
renters were not specifically looking for micro units in
The Macro View on Micro Units
Micro-Unit-Renter Satisfaction Scores
Micro-unit renters
5.00
4.00
3.88 3.97
4.49 4.38
3.99 4.06
Kingsley Index
4.12
3.96 3.86
3.70
3.53
3.96
3.72
2.91
3.00
2.00
1.00
0
Overall
satisfaction
Mgmt.–
Value for
overall
amount paid
satisfaction
Location
their search. Once they become micro-unit residents,
their overall satisfaction levels are similar to those of
conventional renters or trail only slightly. This information was evident when the micro-unit satisfaction
results were compared to the Kingsley Index. Dissecting the data further, micro-unit renters are more
satisfied than conventional renters with community
location, amenities, and unit features and fixtures.
However, they rate the perceived value for amount
paid and satisfaction with unit floor plan and layout
considerably lower than renters of conventional units.
This result leaves room for market participants to
improve on space layout.
Going back to micro-unit renters’ initial leasing
decision processes, the survey results suggest location-related factors, including proximity to work and
school, neighborhood amenities, and public transportation, are key, as are price and the ability to live
alone. All of these responses are not only similar to
potential renters’ decision processes but are also in
concurrence with current developer practice.
Market participants have indicated that occupants of
micro units tend to stay for relatively short periods.
This hypothesis was tested by asking micro-unit
renters about future renewal intentions as well as
purchase interest and likelihood of recommending micro-unit communities. The survey revealed
that micro-unit renters generally indicate a lower
likelihood of renewal than conventional renters do,
with 41 percent of micro-unit respondents indicating likely renewal, compared with 57 percent in the
Kingsley Index. The significantly lower renewal rate
The Macro View on Micro Units
Community
amenities
Floor plan/
design &
layout
Apartment
features &
finishes
can potentially translate into higher operating cost,
as has been witnessed in historical performance.
To further explore the renewal decision, Kingsley
Associates analyzed the decision factors cited by
each renewal group: unlikely, unsure, and likely.
For micro-unit residents who indicated they were
unlikely or unsure of their renewal decision, price
was the primary decision factor, followed by space
Micro-Unit Renters’ Priorities in Initial
Lease Decision
Lease decision factors
Percent
4s and 5s
Location
97%
Price
86%
Proximity to work/school
78%
Proximity to neighborhood amenities
73%
Ability to live alone
71%
Proximity to public transportation
62%
Internet/wifi services
54%
Quality of finishes
52%
Floor plan/layout
42%
Assigned parking
32%
Common areas/amenities
32%
Sustainability practices
29%
Sense of community
27%
Pets allowed
26%
In-unit storage
25%
Visitor parking
21%
Neighbors with similar lifestyles
20%
19
Micro-Unit Renewal Intentions vs. Conventional-Renter Benchmark
100%
20%
35%
80%
23%
60%
23%
While micro-unit respondents’ likelihood of renewal fell below the traditional renter average, likely
recommendation was comparable, with 77 percent
of respondents indicating they would probably or
definitely recommend a micro unit to a peer with
a similar lifestyle. Whereas 77 percent of conventional renters in the Kingsley Index are also likely to
recommend their communities, the proportion that
definitely would recommend (42 percent) is notably
higher than for micro-unit respondents (22 percent).
When asked about the prospect of owning a micro
unit, over one-third of micro-unit renters (37 percent) indicated they would consider purchasing their
micro unit (or a similar unit), if available for sale.
40%
0%
57%
41%
20%
Micro-unit renters
Likely to renew
Kingsley Index
Unsure
Unlikely to renew
Top Renewal Decision Factors by Renewal Intention
Price 77%
Space needs 31%
Parking 20%
Key Findings
Price 70%
The following is a summary of key consumer survey
findings:
Space needs 35%
Job relocation 35%
Conventional Renters
Location 95%
n I nterest: 24 percent of conventional-unit renters
indicated they would be interested or very interested in renting a micro unit.
Apartment features 59%
Price 46%
0%
20%
Likely to renew
40%
60%
Unsure
80%
100%
Unlikely to renew
Micro-Unit Recommendation vs. Conventional-Renter
Benchmark
1%
7%
100%
—Trade-offs: Respondents interested in renting a
micro unit would be most likely to pick a micro
unit over a conventional-size unit in exchange
for lower rent, desired location, and ability to
live alone.
n R
ent expectations: A large margin of respondents
expect micro-unit rent to be 21 percent to 30
percent less than that of a comparable studio.
5%
6%
13%
15%
80%
needs. Underscoring the previously mentioned
attractiveness of micro-unit locations, almost all
residents likely to renew cited location as a decision
factor (95 percent). Micro-unit renters likely to renew are also positively influenced by the apartment
features.
n Decision factors:
35%
60%
—Most appealing: lower rent; and
55%
—Greatest hesitancy: lack of storage.
40%
n Most important amenities:
20%
42%
—Grocery store nearby; and
22%
—Washer and dryer in unit.
0%
Micro-unit renters
Definitely would
Probably would not
20
Probably would
Kingsley
Index
Definitely would
Probably would
Unsure
Probably would not
Unsure
Definitely would not
Definitely would not
The Macro View on Micro Units
Micro-Unit Renters
n Lease decision: Nearly all respondents (97
percent) indicated location was a top priority in
choosing a micro unit.
n Renewal decision: Fewer micro-unit renters are
likely to renew their lease than conventional-unit
renters, 41 percent and 57 percent, respectively.
n P
urchase interest: 37 percent of respondents
would be interested in purchasing their micro
unit or a similar unit if for sale.
In the following section, RCLCO examines best
practices and lessons learned from ULI Multifamily
Council member participants and other developers,
operators, and design professionals that have ex­
perience with micro units.
—Top-cited factors for those likely to renew:
location and apartment features; and
—Top-cited factors for those unlikely to renew:
price and space needs.
The Macro View on Micro Units
21
Best
Practices and
Lessons
Learned
T
o understand who the market audiences are
for small units and micro units and how they
may differ from residents in conventional units in
the market, RCLCO (Robert Charles Lesser & Co.)
prepared case studies of selected rental apartment
communities that include micro units and conducted a series of interviews with developers, owners,
operators, and design professionals regarding their
experience with micro units. RCLCO identified 30 existing communities across the country that include
micro units as all or part of their unit mix, with a
total of nearly 1,700 micro units. In addition, 18 communities as of the writing of this report are either
under construction or planned that will add approximately 1,850 new micro units to the inventory.
Relatively few rental apartments are purpose built
entirely with very small units. Less than one-half of
the existing communities identified previously have
80 percent or more of their mix represented by micro units. However, many of the communities under
construction and proposed are mostly if not entirely
micro units, illustrating that this is a growing national trend.
Although micro-unit communities are popping up all
over the country, they have generated considerable
controversy in some markets. For example, in Seattle, SRO and micro-unit rental communities have
been introduced into several established neighborhoods with predominantly single-family detached
22
homes. Detractors complain about the strain these
communities put on parking in the neighborhood
and the density of these types of communities that
are, while permissible, often out of character with
the existing housing stock. Moreover, they contend
that micro-unit communities, particularly those
structured with short-term leases, attract an undesirable, transient population. In southern California,
a new rental apartment complex, the Eleve, was
delivered with units averaging only 425 square feet.
The community was met with such public backlash
that the city of Glendale soon thereafter raised its
minimum residential unit size to 600 square feet
to preclude another micro-unit project being built
within the city limits.
Through case study research and interviews with
market participants with experience with micro
units, this study has identified the following critical success factors and considerations for anyone
contemplating development of or investment in a
community with these very small units.
Target Market Audiences
The vast majority of residents who choose micro
units are young professional singles. They are
typically first-time renters who have not accumulated much “stuff” yet and are, therefore, completely
comfortable with limited space. Many consider these
units “launch pads” for new careers and lives in a
new city or place. Micro-unit occupants are described as social animals, but ones who do not want
or need to socialize in their units. Some couples
occupy micro units, but singles are the norm. Some
older individuals are looking for a part-time residence near family, and some use a micro unit as an
in-town pied-à-terre, or crash or party pad, but this
is only a small segment.
Market participants indicated that micro-unit
occupants trend slightly more male than female,
presumably because women are generally more
interested in and tolerant of roommates. Micro-unit
renters don’t tend to remain long in their unit: they
stay only one or two years and then graduate to
a larger unit. Often the consumer is a parent of
children with “delayed-onset-adult syndrome.”
Micro units seem to appeal to young renters in the
tech and new media industries, though this may be
a function of the markets in which many of the existing micro-unit communities have been built. This
The Macro View on Micro Units
Location of Micro-Unit Communities
RCLCO has found
2,600 micro units in:
1
1
1
5
30 Existing
g Communities
18 Under Development & Planned
Existing Micro Units = 1,657
Under Development
p
& Planned Micro Units = 1,844
7
1
2
2
1
3
1
6
1
1
1
1
1
9
1
1
1
RCLCO
possibility was later confirmed by the consumer
feedback survey described in the previous chapter.
Perhaps not coincidentally, the rise in micro units
has corresponded with an increase in millennials (or
generation Y) entering the workforce and beginning
to form households—the vast majority of whom rent
in their early 20s. Examining some key gen-Y trends
sheds light on why micro units are appealing to this
generation. First, generation Y is highly mobile and
tends to move frequently to follow opportunities
and jobs. Many millennials choose where they want
to live first and then look for a job. This generation
has demonstrated a renewed interest in urban and
urbanizing “authentic” locations—transit-rich locations are a plus, but walkable is a must. The Great
Recession has had a disproportionately large impact
on millennials, with unemployment among the
under-30 set nearly double that of older members
of the labor force. Gen-Yers have significantly lower
incomes and much higher student loan debt loads,
and therefore less disposable income to spend on
things like expensive apartments. All of this has
contributed to delayed household formation and
delayed marriage among members of the millennial
generation. Many of these same factors are what
make micro units so attractive.
The Macro View on Micro Units
As an example, a community in Chicago converted a hotel into a rental apartment complex and
kept a small portion of the mix as essentially hotel
rooms in the 300-square-foot range. These units
have performed extremely well and have attracted
nurses, medical residents, and interns from the
nearby Northwestern University medical campus.
Nurses and aspiring doctors don’t spend much time
in their apartments, so micro units are a perfect
solution. The developer of this community wishes
in retrospect that it had included many more micro
units in the mix. Patrick Kennedy of Panoramic, who
has conducted research on micro units, has built
one small community and currently has a 160-unit
all micro-unit community under construction in San
Francisco. He describes four key trends that are
increasing the appeal of micro units:
n D
elayed household formation and/or post-­
collegiate odyssey;
n An increase in single-person households;
n A
decrease in car ownership, particularly among
millennials; and
n Y
ounger households with less accumulated stuff
and a growing “sharing economy.”
23
Purchase and Rent
Motivations
Rent Comparison
In a separate survey that was conducted of 400
residents regarding purchase motivations, location
ranked number one—locations that were walkable,
not necessarily transit accessible—but “authentic”
neighborhoods were valued most. Most respondents reported a willingness to trade size of unit
in exchange for amenities (both community and
neighborhood), but only for the locations that met
the number-one location criterion. Price was not
the primary factor, but cost ranked very high as a
purchase motivation. (Figures for this section are
courtesy of RCLCO.)
Based on the interviews, three closely interconnected “purchase motivations” have become apparent
as driving the interest in micro units. The most
important factor seems to be the desire among a
growing segment of—particularly young—renters
to live in walkable, trendy locations, primarily in
the urban core of relatively expensive apartment
markets. Next is economics and the willingness of
renters to trade off a much smaller unit for less absolute rent in these highly desirable urban locations.
Finally, the desire to live alone is the primary motivator that draws residents to the micro-unit concept. The consumer is often a parent who is paying
rent for “delayed-adult-onset-syndrome” children.
Micro units are competing with the private-bedroom
underground market.
Closely related to square footage reduction, the
“sweet spot” where potential residents seem to
choose micro units over conventional studio and
one-bedroom apartments is when micro units are
positioned with absolute monthly rents that are approximately 25 percent to 30 percent below rents of
conventional units, controlling for other factors (e.g.,
location, age, unit features), and are in line with or
below the cost to share a larger apartment with one
or more roommates. This seems to be the point at
which a segment of the market is willing to trade off
Unit-Size Comparison and Rent
Micro-unit studio
24
Size
Rent
300 sq ft
$1,500
Conventional studio
500 sq ft
$2,000
One bedroom
650 sq ft
$2,400
Two bedroom and roommate
500 sq ft
$1,700
Conventional
studio
Micro-unit
studio
500 square foot
300 square foot
Sticker price
$2,000
$1,500
Rent per
square foot
$4.00
$5.00
Size
considerably less space for lower rent in a well-­
located, highly amenitized community. Few apartment residents think in terms of value ratio (cost
per square foot per month) but rather think about
their monthly rent cost. The hypothetical example in
the table illustrates this positioning paradigm.
Although less powerful than the “lower” monthly
rental rate, other important selling propositions for
those marketing micro units include very low utility
costs compared with conventional apartments—
sometimes as low as only $15 per month. Another
important message is the ease of moving into a
micro-unit apartment, particularly those that come
with built-in furniture systems. All a resident needs
to move in is a small couch and a suitcase. Flexible
lease terms that accompany some micro-unit communities and many SRO developments are also an
attractive selling point for footloose millennials.
Selling Proposition
The selling proposition to developers, owners, and
operators is all about the economics. Achieving
higher density often translates into higher yields.
From a construction standpoint, building a microunit community costs approximately 5 percent to
10 percent more per square foot because of the
relatively fixed cost associated with building a kitchen and a bathroom, which is generally the same
for a micro unit as for a conventional apartment.
However, the typically 25 percent higher value ratio
that can be achieved for these units reportedly more
than compensates for the higher construction cost.
Managers of communities with micro units report
slightly higher operating expense per square foot,
perhaps an additional $5 per square foot higher
annually, because a building with a high percentage
of very small units tends to generate more trash
per square foot than a similar-sized conventional
project. Yet again, these same operators report
that the higher value ratios more than compensate
The Macro View on Micro Units
for the increased operating cost per square foot.
Although identifying good case study analogs to test
the financial implications of delivering micro units
has been a challenge, one developer interviewed
for this research estimated that this higher cost and
higher revenue dynamic per square foot adds an
additional 100 basis points to the going-in yield for a
micro-unit development compared to a conventional
rental apartment deal.
The Panoramic, San
Francisco, California,
uses 3D renderings on the
website to provide context
of micro-unit function and
livability.
PATRICK KENNEDY, PANORAMIC
INTERESTS
Ideal Size
In an attempt to understand what constitutes the
ideal size for a micro unit, one developer interviewed for this effort revealed that it had conducted
some primary consumer research on the subject.
The developer created a series of micro-unit mockups and had a graduate student live in the units and
provide feedback on what worked and what did not.
Based on this research, this developer determined
that a micro unit with less than 200 square feet was
too small, that a unit with 375 square feet was too
large, and that something in the 275- to 300-squarefoot range was optimal for a “one person plus dog”
household. This research also revealed the need to
have flexible furniture systems and adequate storage for units this small to be workable.
Some design professionals interviewed for this
research effort seriously questioned the ability
to produce units compliant with the Fair Housing
Amendments Act (FHAA) at under 300 square feet.
If a hallway and a bathroom alone account for 150
square feet, then not much room is left for a kitchen,
closet, and living room/bedroom. Some skeptical of
sub-300-square-foot units believed that 350 square
feet is a much more reasonable amount of space to
create a truly compliant unit and that something in
the 375- to 400-square-foot range would be much
more marketable and could be accomplished without
the need and expense of built-in furniture systems.
Despite this feedback, this survey found a number
of examples of micro units across the country that
were smaller than 300 square feet. A preliminary
review of selected sub-350-square-foot micro units
indicates that they are indeed FHAA compliant.
Micro-Unit Solutions
Most micro units in the sub-300-square-foot range
cannot accommodate standard-sized furniture,
The Macro View on Micro Units
Patrick Kennedy in a
micro unit. The image
illustrates the flatscreen TV mounted on a
tilting arm, which greatly
enhanced the functionality
of the unit and served to
teach residents how to
live in their units and how
to set up the furniture
layout.
PATRICK KENNEDY, PANORAMIC
INTERESTS
25
appliances, or cabinets, and developers have turned
to manufacturers that have more typically provided
furniture for smaller living spaces in trailers, boats,
and mobile homes. One of the key impediments
to making micro units smaller and more efficient
is that all major U.S. suppliers make systems and
appliances that are too big, including heating,
ventilation, and air-conditioning systems, kitchen
appliances, and cabinets. Many offer good-quality
smaller products overseas, but these are not typically available in the United States, and often these
appliances do not carry the important Underwriters
Laboratory certification or are designed for 240-volt
and not U.S. 120-volt electrical capacity. Many U.S.
consumers are turned off by European and Asian
brand appliances that are sufficiently compact but
lack acceptable performance standards (e.g., allin-one washer-dryers). One developer interviewed
for this report wanted to provide smaller kitchen
Updated versions of
the vintage Murphybed system are added
amenities to the
functional living-space
of a micro unit.
RESOURCE FURNITURE
appliances but had to go commercial, and the cost
of this option made no sense. This research has certainly surfaced the need to urge U.S. manufacturers
to make smaller appliances, cabinets, and furniture
that can be used in micro units.
Some developers and design professionals cited
built-in furniture systems as essential in promoting
the livability of micro units. These include modern
versions of the old Murphy-bed system, typically
with a queen-sized bed that easily converts to dining
or desk area; bench seating in window nooks; and,
in one case, a flat-screen TV mounted on an articulating arm. Convertible, built-in furniture promotes
livability and versatility, and it helps show residents
how to live in these small spaces.
Furniture systems come with high cost (anywhere
from $4,000 to $12,000) but can be amortized and
embedded in the unit rent at a reasonable price (say
an extra $40 to $200 per month).
In addition to furniture and storage solutions,
creative design ideas are being used in an attempt
to reduce unit size while at the same time making
them FHAA compliant. One such solution is the
use of a wall-hung vanity with no cabinet below in
a bathroom, which allows the space allocated to
a bathroom to be reduced yet keeps it accessible.
Or, as one developer has illustrated (see image top
right, page 27), including a “gadget” wall instead
of a closet eliminates the need to clear 24 feet of
a drywall closet at the entrance of the unit, again
allowing the unit width to be reduced. Amenity and GatheringSpace Trends
Rental apartment communities with micro units
are enticing prospective residents to accept much
smaller apartment footprints by offering an extensive array of amenities. What happens outside the
walls of one’s apartment is just as important, if not
more so, than what goes on inside. Therefore, in addition to the usual lineup of fitness amenities, pool,
cyber café, and so on, large landscaped outdoor
space is key. A number of micro-unit communities
have extensive rooftop amenities that include fitness
centers with fabulous views, fire pits, gas grills,
catering kitchens, pools with private cabanas, and
evening movies projected on large screens or walls.
26
The Macro View on Micro Units
AVA Somerville, in Somerville, Massachusetts, features unique amenities like
customizable closets and retractable walls in select floor plans.
AVALON COMMUNITIES
The Harper on 14th Street, N.W., in Washington, D.C., includes a “movable” kitchen
island. Because the island is not technically fixed in place, it did not count against
FHAA clear passageway requirements, and the width of the unit could be reduced
accordingly.
KEENER MANAGEMENT
Bigger is not necessarily better, and many communities are moving toward a wider variety of smaller amenity spaces that are laced throughout the
building. The intent is to create a series of multiple
smaller amenity or gathering spaces that enable
residents to socialize, work, and gather outside their
individual units. Most have some type of a clubroom
or cyber café, but it is no longer the focus of the
amenity space. The traditional business center is
disappearing in favor of “benching”—large communal tables with Wi-Fi like those found these days
at Starbucks. Here, young millennials can “gather
alone” and text.
Bikes are increasingly replacing cars in micro-unit
communities as many more millennials are either
“car-lite” or carless. Communities are going beyond
just being pet-friendly; they are becoming pet-centric, with grooming stations; pet walk and park
LINK Apartments, Seattle, Washington.
HARBOR PROPERTIES
Ace Hotel, New York, New York.
DOUGLAS LYLE THOMPSON
The Macro View on Micro Units
27
Under-couch
storage.
General Design Considerations
ERIC ROTH, PURE HOME
Storage is critical to making micro units livable. It
is definitely one of the top criteria for considering a
micro unit. Short of providing fully furnished units,
look for opportunities to provide built-in seating with
storage below. Use the plenum above the bathroom
for additional storage, and don’t hesitate to go
vertical with shelving. Providing a built-in armoire
removes the need for residents to bring large furniture storage solutions with them.
Interviews with developers and design professionals
revealed other innovative ideas that were tried to
make micro units successful but turned out to be
unsuccessful. One such “don’t” was experimenting
with a bathroom and shower combination, similar to
what one might find on a boat or an RV. This saved a
considerable amount of space but was overwhelmingly rejected by focus group participants.
Soundproofing in a community with micro units is
critical—even more so given the higher density than
in a conventional apartment.
areas; pet sitting, pet walking, and pet play-date
services. This survey learned of one community
that is combining the pet and sharing economies
and taking pet-centric to the next level by offering
a community dog that can be borrowed for a short
time!
For many of the communities that are situated in
highly desirable, walkable mixed-use environments,
developers are able to scale down their amenity
offerings to some degree because the neighborhood
itself is the primary attraction. For example, lobbies
in some locations are going the way of boutique hotels and are getting smaller. However, in pioneering
locations or in underserved retail markets, developers are finding they have to overcompensate for the
lack of neighborhood amenities and are including
an extensive array of features, sometimes even a
convenience or mini-mart retail component just for
residents.
In some larger micro-unit communities, developers
are adding gathering spaces on individual floors to
provide residents with a “living room” outside their
units.
All amenities should be verified against consumer
expectations in a given market.
28
Light, air, and volume can compensate for smaller
size of micro units. Volume creates the illusion of
additional space, so building with ceiling heights of
nine feet or more is essential. In addition, the use of
oversized (six to eight feet high) operable windows is
critical to bring light and air into the units. Balconies
are too expensive to build, but Juliet balconies work
just fine and they allow residents to open their units
to the outdoors. Bay windows also provide more
light to the unit and can be an extra seating area.
Kitchen Design
The design and configuration of kitchens in micro
units have received a lot of attention. Developers and
design professionals have wrestled and experimented with what is essential, what is nice to have but
not necessary, and what to avoid. Some of the feedback from developer interviews has shed light on
the dos and don’ts of kitchen design in micro units.
The consumer survey indicates that it is true that
occupants of micro units do not cook often, but
experiments with reduced-size appliances, smaller
sinks, and space-saving washer-dryer appliances
from European and Asian manufacturers have not
tested well with American audiences. Micro units
need to supply smaller, but still full-size appliances (i.e., a full-height 24-inch refrigerator) because
The Macro View on Micro Units
The Harriet, San
Francisco, California
(left), and the Wharf,
Washington, D.C. (below),
each illustrate the
importance of natural
lighting to amplify the
space.
PATRICK KENNEDY, PANORAMIC
INTERESTS (LEFT); PN HOFFMAN
(BELOW)
residents do not like small, under-countertop refrigerator units like those found in hotel suites. A micro
unit has to have a full-size 30-inch sink; attempts
to use smaller fixtures did not appeal to renters
and can create potential conflicts with accessibility
requirements. Having a small cooktop is important, but including an oven is not necessary as long
as the kitchen has a combination convection and
microwave oven. But don’t put the microwave under
the countertop, because this did not test well. Many
communities that have micro units and smaller
studio units include an 18-inch dishwasher and a
small stacked washer-dryer, but this amenity varies
by market, and dishwashers and in-unit laundry
appliances may be possible to eliminate in some
instances. Although no magic formula exists, most
respondents indicated that a linear kitchen ranging
between five and eight feet in length is ideal.
Some developers are experimenting with prefabricated and modular kitchens and baths that are
trucked onto the construction site and “plugged
in” to the units. However, the jury is still out on this
technique, as there is a lack of consensus among
developers on whether or not these units save time
and money.
The Macro View on Micro Units
What’s Next—Micro Suites?
The next evolution of the micro-unit concept is
currently under construction in San Francisco.
Panoramic is building a 160-unit community in the
SoMa district that will offer a mix of micro-unit
studios and three-bedroom, two-bath “micro suites”
that are approximately 700 square feet in size. That
is 233 square feet per occupant—assuming only one
person per bedroom—with five people that is 140
square feet per person. Cozy. These units will have
no formal dining or living room but will have a kitchen. The unique selling proposition of the micro suite
29
Modular kitchens are
useful to the consumer,
but developers are on the
fence about the marginal
impact to the bottom line.
RESOURCE FURNITURE
According to the developer, one of the advantages
of the micro suites is that these units are a good
solution for corners of buildings that are typically
difficult to access with micro units alone.
Side-by-side units.
RCLCO
30
over a micro unit is that the tenants enjoy the same
benefits of lower absolute rent, and the developer is
able to leverage the fixed cost of a kitchen and bathrooms over more bedrooms compared with a studio.
As in a professional dorm, the developer plans to
offer a roommate matching service, housekeeping
will be embedded in the rent, and the developer will
maintain rent protection insurance, which provides
roommates with a two-month “abandonment grace
period” for $20 per month.
Some developers who are concerned that the trend
toward tiny units may be just a fad are mitigating
this risk by designing units, bearing walls, and
utilities and systems so that micro units sitting sideby-side can easily be combined at a later date into
conventional one-bedroom and two-bedroom units.
Location, Location, Location
Some of those interviewed for this effort hypothesize that the “affordable” price positioning advantage afforded by micro units would be a compelling
proposition anywhere. If one could offer smaller
units at a 25 percent to 30 percent discount relative
to the existing inventory of conventional units, the
concept would be equally as viable in suburban and
lower-density locations as it would be in expensive
urban locations. However, one operator active in
southern California found that it had to temper
expectations regarding how small it could make
units because it was competing in submarkets
that generally had older, much larger, and yet still
relatively affordable units. Most of the respondents
were convinced that micro units were most likely
to succeed in high-density, expensive urban and
urbanizing coastal markets.
The Macro View on Micro Units
The Panoramic, San
Francisco, California,
offers a mixture of units
and “suites” that can
be converted later into
conventional units.
Marketing and Branding
The term micro unit has a negative connotation in
the marketplace among some consumers, communities, and jurisdictions. A number of developers
and operators are attempting to rebrand micro units
with more progressive labels. Suggested rebranding
ideas include the following:
PATRICK KENNEDY, PANORAMIC
INTERESTS
n Innovation units;
n Nano unit;
n Launch pad;
n Urban flats; and
n Fun unit.
Developer and operator Keener Squire in Washington, D.C., recently completed the Harper rental
apartment community with 144 units, including
small studios and junior one-bedroom units with as
few as 350 square feet. Keener Squire is currently
building another micro-unit community, the Drake,
with 218 units that will average 419 square feet. The
company makes no mention of micro units in any of
its presentations or marketing material—they are
just apartments in a great location.
The Macro View on Micro Units
This community is also trying to simplify the leasing
process and differentiate itself from other new communities in the marketplace by including all utilities
in the monthly rent.
Cautious Capital
Most institutional capital does not have experience
with micro-unit developments and has generally
shied away from taking the risk or required a much
higher return to compensate for the perceived
31
At the Harper, you will
find no mention of unit
size on the website, and
you will be hard pressed
to get the leasing staff
to offer information on
how big (or small) the
units are.
The Harper Savings Features
n Security deposit—none
n Amenity fee—none
n All electric—included in rent
n Trash removal—included in rent
KEENER MANAGEMENT
n Water and sewer—included in rent
n Hot water—included in rent
n Personal storage space—included in rent
ever, this caution may be fading as the market gains
more experience with micro-unit developments. Reportedly, Hoffman-Madison recently secured financing from a Canadian pension fund manager for a
large mixed-use residential and commercial project
in Washington, D.C., the Wharf, which will include
330 rental units in the first phase, approximately 170
of which will be micro-unit studios ranging in size
from 330 to 360 square feet.
Case Study Projects
These are a few of the case study communities that
contributed to the best practices and lessons learned.
Factory 63, Boston,
Massachusetts.
GERDING EDLEN
32
increased risk profile associated with these types
of developments. The Panoramic micro-unit/suite
development in San Francisco previously mentioned
was able to secure a $50 million construction loan
in 2013. However, one-half the units in this development had been preleased to the California College
of the Arts, and it is unknown whether funds would
have been forthcoming had this development truly
been a 100 percent “spec” market-rate rental. How-
Factory 63, Boston, Massachusetts
Located in Boston’s newly minted “Innovation District,” this community includes 38 units in a converted shoe factory, 23 of which are dubbed “innovation”
micro-studio units. The units range in size from
368 to 504 square feet and have lease rates ranging between $1,699 and $2,450 per month, which
translates into value ratios of $4.62 to $4.86 per
The Macro View on Micro Units
The Flats, Chicago, Illinois
This community by Cedar Street Development is
a converted hotel located immediately adjacent to
Northwestern University’s medical campus near
Navy Pier just north of the Loop. The community includes 350 units, of which approximately 15
percent are micro units—essentially the existing
hotel rooms converted to apartments. These micro
­studios range in size from 275 to 350 square feet
and start at $900-plus per month. According to the
owner/operator, micro units have been very successful by appealing to medical residents, nurses,
and university hospital staff, and the developer
wishes it had had the guts to convert more of the
hotel rooms into micro suites. According to the
website, the Flats offers high-quality, amenity-rich,
authentic environments at approachable rents,
always.
Lofts at 7, San Francisco, California
Flats Chicago, Chicago, Illinois.
FLATS CHICAGO
square foot per month. Each resident gets a ninesquare-foot storage cube in the basement included
in the rent. This community reportedly leased up in
two weeks and now regularly sports a waiting list
sign-up sheet on its web portal.
This community by the Dolmen Property Group is a
converted local television broadcasting facility with
88 micro units that range in size from 275 to 530
square feet and include a mix of studios and loftstyle units. Rents range between $1,550 and $2,350
per month, which translates into a value ratio range
of between $4.43 and $5.64 per square foot per
month.
Despite its relatively small unit count, this community has an extensive 6,500-square-foot landscaped
roof deck with an outdoor cinema, an open-air sundeck with grills and a fire pit, and a fitness center
with city views.
The Lofts at 7, San
Francisco, California.
DOLMEN PROPERTY GROUP
The Macro View on Micro Units
33
Micro Lofts at the Arcade Providence,
Providence, Rhode Island
Micro Lofts at the Arcade
Providence, Providence,
Rhode Island
BEN JACOBSEN/COURTESY NORTHEAST COLLABORATIVE ARCHITECTS
The community is another adaptive use—of one of
the nation’s oldest indoor shopping malls. Developed by Evan Granoff and designed by Northeast
Collaborative Architects, this complex features retail
tenants on the lower floor and 48 micro units on two
upper floors. Micro-unit junior one-bedrooms range
in size from 225 to 450 square feet and feature full
bathrooms, built-in beds, seating, and storage, as
well as kitchens equipped with refrigerators, sinks,
dishwashers, and microwave ovens. When residents
need more space than their individual units offer,
they can take advantage of a game room, a TV room,
and porches. Other common amenities including onsite laundry facilities, bike storage, locked basement
storage units, and a parking garage across the street.
ekoHAUS Freedom Center, Portland, Oregon.
WDC PROPERTIES
ekoHAUS Freedom Center,
Portland, Oregon
This community by WDC is one of the few new-­
construction, purpose-built micro-unit communities. The development consists of 150 micro units in
a mid-rise building. Units range in size from 267- to
385-square-foot studios and rent for $895 to $1,550
per month, or $3.35 to $4.03 per square foot per
month. Key marketing messages for this community
include the following:
n “ Live urban in Portland”;
n “ Low-impact floor plans”; and
n “ Eco-friendly living.”
34
The Macro View on Micro Units
n T
he target market audience for micro units
is predominantly young professional singles.
Secondary segments include younger couples,
older move-down singles, and some pied-à-terre
users. Micro-unit dwellers trend slightly more
male.
My Micro NY, New York,
New York.
LEDAEAN.COM
n T
he most important, and interrelated, factors
driving the interest in micro units include the
following:
My Micro NY, Kips Bay, New York
The community is the result of a design competition
in New York City for which Mayor Bloomberg waived
the city’s minimum unit size requirement for a
demonstration project to help promote the development of affordable housing within the city. This
community will include 55 micro-unit studios that
range in size from 250 to 370 square feet. Approximately 40 percent of the units will be below-market
affordable housing with rents targeting household
earnings at 80 percent of area median income. The
remaining 60 percent of the units will be market
rate with rents starting at $1,900 per month, which
compares with rents at conventional studios in the
$2,500 to $2,700 per month range. These units will
be entirely modular and will be constructed off site
in a factory setting and assembled on site.
Key Findings
Approximately 30 rental apartment communities
with nearly 1,700 micro units were identified as part
of this research effort. In addition, 18 communities
under construction or planned and proposed will
include approximately 1,800 micro units.
The Macro View on Micro Units
—The desire of younger residents to live in walkable, hip locations, primarily in the urban core of
relatively expensive apartment markets;
—The willingness to trade off a much smaller unit
for a lower absolute monthly rental payment in
these highly desirable locations; and
—The desire to live alone.
n T
he “sweet spot” where renters seem to choose
micro units over conventional studios, one-­
bedroom apartments, or roommates is when
micro-unit rents are positioned approximately 25
percent to 30 percent below conventional units.
n D
evelopers and operators acknowledge that
both building and operating rental apartment
communities with a high percentage of micro
units are more expensive, but the increased rent
per square foot more than compensates for this
added cost.
n S
ome interviewed for this research expressed
doubts that it is possible to produce sub-300square-foot micro units that are accessible;
however, a cursory review of selected micro-unit
floor plans in that category indicates that this is,
indeed, possible.
35
n I t may be necessary to include built-in and/or
flexible furniture systems and storage to make
sub-300-square-foot micro units functional.
n Design
dos and don’ts include the following:
—Smaller, but still full-sized kitchen fixtures and
appliances are more acceptable to renters than
some of the compact or dual-function European
or Asian versions (e.g., include a 30-inch sink,
24-inch full-height refrigerator, small stacked
washer-dryer).
—Some question exists whether it is necessary to
include a dishwasher or a washer-dryer appliance; this may vary by market.
—A linear kitchen ranging between five and eight
feet in length is ideal.
—Storage is critical to making micro units livable,
including built-in seating with storage below,
storage above a bathroom plenum, built-in armoire furniture, vertical shelving, and so on.
—Tall ceiling heights of more than nine feet create
a sense of volume and can counteract the small
square footage of micro units.
36
—Light and air are critical to making micro units
feel bigger than they are. Use six- to eight-foot
tall windows. Bay windows also provide light and
extra seating in a micro unit.
—Build in flexibility to convert side-by-side
micro units into conventional one-bedroom
and two-bedroom units in the event the trend
reverses.
—Provide extensive amenity space in the community to compensate for the lack of space in the
units. Typical community amenities include the
normal lineup of fitness, pool, and cyber café,
but also incorporate extensive roof-top amenities, fire pits, catering kitchens, and the like.
—Provide additional “living room” spaces on each
floor to serve as a gathering and entertaining
space for residents outside their units.
n T
aking the micro-unit concept to the next level,
a developer in San Francisco is building a new
community with a combination of micro-unit
studios and two-bedroom micro suites that are
approximately 700 square feet, or 233 square feet
per occupant.
The Macro View on Micro Units
Conclusion
M
icro units have generated considerable interest and some controversy in the real estate
community in the past several years. This research
illustrates that the migration toward smaller
average unit size, based on a shift in mix to studio
and one-bedroom units, and the number of rental
apartment communities offering micro units are a
growing trend. Whether this turns out to be a lasting
phenomenon or a passing fad, micro units have renewed the focus on efficient layouts and innovative
design solutions. Many of these smaller units are
designed and configured to feel larger to potential
renters than older conventional units by virtue of
higher ceiling heights, larger windows, built-in
storage, and in some cases, flexible furniture systems. The evidence from the market indicates that
smaller units tend to outperform conventional units;
The Macro View on Micro Units
they tend to have higher occupancy and achieve
significant rent premiums. Still unclear is whether
this performance is driven by the relatively limited
supply of these smaller units on the market, or
whether a sizable, and perhaps untapped, segment
of renters is willing to make the tradeoff and pay
considerably more per square foot rent in exchange
for highly desirable locations, better community
amenities, the ability to forgo a roommate—or
perhaps some combination of these factors. The
consumer research indicates that, from the renter’s
perspective, the micro-unit strategy that offers a
lower monthly rent “sticker price” compared with
conventional units is a compelling proposition. But it
is also clear from the research that micro units are
not for everyone and that micro units may not be the
solution for every location.
The goal of this effort has not been to find conclusive answers to these questions, but rather to shed
light on the key issues, challenges, and some of the
solutions that market participants have experienced
and experimented with to date in dealing with micro
units. The real estate industry needs to investigate
this issue further and continue to monitor the successes and challenges that this unique rental apartment product presents, including the risk/­reward
profile and long-term market viability of micro units.
We thank those who have participated in this study,
and we hope this report provides an objective background for future micro-unit developments as those
of us in the industry collectively and individually
seek solutions that best suit the markets we serve.
37
Research
Committee
Members
Bill Whitlow
Committee Chair
Terra Search Partners
San Francisco, California
Bill Whitlow’s 25-year tenure in the real estate
industry provides the team with deep insights and
industry and functional context across a broad
spectrum of areas, including finance and capital
markets, investment strategy, asset and property
management, development, and leasing. During
his career, Whitlow has held senior positions at
firms such as Venture Corporation, Studley, Arthur
Andersen, PricewaterhouseCoopers, and Aetna
Realty Investors, where he has executed more than
$3 billion in debt and equity transactions and has
provided capital markets, strategic management
consulting to clients on projects and portfolios
valued in excess of $6 billion. Whitlow’s experience
includes the leadership of three property management companies. He also has deep expertise in
capital raising, strategic and operational advice, and
client relations.
Whitlow is an active supporter of Project Open Hand,
AIDS Foundation, Sacred Heart Schools, Urban Land
Institute, and other charitable organizations. He is a
past board member of the San Francisco Bay Area
YMCA, the San Jose chapter of the American Red
Cross, and the Silicon Valley Roundtable Executive
Board of the University of Illinois Foundation.
He holds a master’s of management from the J.L.
Kellogg Graduate School of Management and a master’s of architecture from the University of Illinois.
38
Charles Hewlett
RCLCO
Bethesda, Maryland
Charles Hewlett has more than 25 years of ex­
perience in real estate and has consulted on a broad
spectrum of commercial and residential properties
in most major metropolitan regions in the country.
Before joining RCLCO, he was president of Lofty
Builders Inc., a real estate service company concentrating in renovation, rehabilitation, and management of investment real estate properties in the
Boston metropolitan area.
A graduate of Brown University in Providence,
Rhode Island, Hewlett has conducted training
seminars on the methodology for metropolitan-­
development trend analysis for regional branch offices of major national commercial developers. He is
also a frequent speaker and ULI panelist, including
the redevelopment of the Southeast Federal Center
in Washington, D.C., and Atlantic City in Norfolk, Virginia. Hewlett has written articles published in the
Corridor Business Journal, Urban Land Digest, and
publications of the National Multi Housing Council.
Teresa Ruiz
SB Architects
San Francisco, California
Teresa Ruiz joined SB Architects with over 15 years
of architectural experience and a focus on multifamily and residential projects. At SB Architects, she
is responsible for advancing the firm’s multifamily
practice in the Bay Area, nationally, and internationally. In her prior role at BAR Architects, Ruiz was
responsible for multifamily and mixed-use projects
totaling over 3 million square feet and built work
with construction costs totaling more than $300
million. Her past projects have received numerous
national awards including the ULI Jack Kemp Workforce Housing Award. Teresa was recognized in 2012
as a winner of ENR California’s Top 20 under 40.
Ruiz is a hands-on architect whose interests and
areas of responsibility go far beyond that of the typical
architect. She is immersed in evaluating best practices
as they relate to the design efficiency, performance,
scheduling, and optimization of the design team and of
her projects. She works closely with the development
team to ensure that goals are aligned and that development objectives are met or exceeded.
The Macro View on Micro Units
Ruiz’s interest in home design led her to volunteering for Habitat for Humanity, both in hands-on
construction work and in providing design services.
Throughout the past two decades, she also volunteered for Christmas in April, now known as Rebuilding Together. She is fluent in English, Chinese,
and Spanish—something that came in handy during
her volunteering as an architect-in-residence/­
instructor with Leap . . . Imagination in Learning in
the San Francisco Public School District in 1998.
Ruiz received her undergraduate degree in Architecture from the University of California, Berkeley,
and master of architecture from the University of
Oregon.
Ron Witten
Witten Advisors
Dallas, Texas
Beginning at MPF Research in 1973, Ron Witten
has spent a career studying and understanding the
economic, demographic, and housing market forces
shaping apartment market performance. President
from 1978 through 2000, Witten led MPF as the
firm became a national leader in apartment market
data and market analysis for the nation’s leading
apartment companies. In July 1999, MPF became a
wholly owned subsidiary of RealPage Inc., the leading provider of property management software to
the apartment industry. He continued as president
of MPF before forming Witten Advisors in January
2001.
The Macro View on Micro Units
Witten has been a frequent speaker on market
conditions as well as emerging demographic forces
shaping apartment markets, addressing meetings
sponsored by organizations including the National
Multi Housing Council (NMHC), the Urban Land Institute, the National Association of Home Builders’ Multifamily Leadership Board, the National Apartment
Association, and NAREIT. He routinely lectures on
real estate markets at Southern Methodist University.
Witten wrote the chapter on market analysis in
ULI’s Multifamily Housing Development Handbook
and cowrote ULI’s Real Estate Market Analysis text as
well as books on real estate markets and investment strategies. He currently serves as a director of
Behringer Harvard REIT I Inc. as well as Apartment
Life, a nonprofit that helps build a sense of community in apartment properties to reduce turnover and
enhance resident satisfaction.
He has been active in the Urban Land Institute
where he is past chair of both the silver and gold
flights of the Multi-Family Council. He now serves
as a member of the NMHC’s Research Roundtable, and he wrote NMHC’s quarterly Market Trends
newsletter in its initial years of publication.
Witten received a BBA in marketing from Texas Tech
University and has completed graduate classes in
statistics and economics at Southern Methodist
University.
39
Appendix
Micro-Unit Interest
Micro-unit
“Rent expectation Ability to live
interest
Micro-Unit Interest and Trade-offs
(% interested/ vs. studio (30% or alone (without
Unless otherwise stated, percentage of
responses ranked among top three trade-offs very interested) greater discount) roommates)
Conventional renters
24%
34%
40%
Age Range
Under 25
34%
31%
49%
25–34
25%
31%
42%
35–44
20%
33%
35%
45–54
26%
37%
36%
55–64
25%
44%
31%
65+
19%
37%
48%
Apartment Floor Plan
Studio/efficiency
44%
32%
53%
1 bedroom
26%
33%
35%
2 bedroom
21%
34%
42%
3 bedroom
23%
41%
49%
Other
15%
54%
45%
Living Arrangement
Single living alone
27%
34%
41%
Single with children
20%
35%
27%
Spouse/partner
18%
32%
25%
Spouse/partner with children
17%
33%
36%
Living with roommate
40%
39%
59%
Gender
Male
26%
34%
39%
Female
23%
34%
41%
Annual Household Income
Less than $25,000
34%
42%
53%
$26,000–$40,000
29%
38%
45%
$41,000–$50,000
27%
29%
34%
$51,000–$74,000
25%
31%
44%
$75,000–$100,000
24%
36%
38%
$101,000–$150,000
21%
30%
33%
More than $150,000
14%
33%
25%
Primary Method of Transportation
Bicycle
24%
35%
40%
Car
26%
33%
40%
Other
43%
43%
50%
Public transit
22%
29%
33%
Walking
13%
43%
50%
Car Ownership
No
24%
35%
39%
Use a shared-car service
27%
25%
45%
Yes
31%
33%
48%
Pet Ownership
No pets
26%
35%
41%
Dog(s)
23%
33%
39%
Cat(s)
19%
34%
38%
Other
32%
40%
38%
Primary Occupation
Accounting
22%
19%
35%
Banking/finance
29%
36%
50%
Construction/engineering/architecture
26%
30%
46%
Consulting
18%
42%
50%
Defense
37%
37%
38%
Education/training
25%
35%
39%
Energy
24%
45%
20%
Entertainment/media
26%
30%
37%
Food/beverage/hospitality
28%
35%
44%
Government
26%
35%
37%
Insurance
27%
24%
38%
Legal
13%
35%
30%
Medical/biotech
21%
35%
43%
Nonprofit or religious
24%
38%
38%
Real estate
21%
15%
26%
Retail
26%
37%
44%
Student
33%
31%
65%
Technology
22%
30%
33%
Telecommunications
23%
36%
29%
Transportation
33%
39%
39%
Other
25%
38%
36%
40
Rank of Trade-offs to Conventional Apartment
Desired
location/
neighborhood
65%
Lower rent
compared with
conventional
studios
84%
Minimal apartment upkeep,
cleaning, etc.
22%
More community amenities/
shared spaces
15%
Neighbors
with similar
lifestyles
15%
Proximity
to public
transportation
12%
Reduced
utilities cost
57%
Shorter
commute to
work
33%
56%
65%
71%
66%
62%
69%
84%
87%
80%
82%
86%
82%
21%
20%
23%
18%
30%
37%
12%
15%
17%
12%
16%
18%
13%
11%
19%
18%
16%
24%
12%
11%
11%
11%
16%
20%
58%
59%
50%
60%
58%
49%
31%
38%
39%
30%
24%
14%
63%
66%
63%
67%
69%
85%
84%
85%
81%
92%
24%
22%
20%
27%
27%
16%
13%
16%
23%
9%
6%
15%
18%
15%
10%
22%
13%
10%
10%
30%
54%
58%
56%
58%
55%
29%
35%
35%
22%
20%
67%
62%
66%
74%
57%
84%
89%
81%
78%
87%
22%
27%
27%
19%
16%
13%
11%
19%
22%
14%
14%
11%
16%
24%
14%
10%
14%
17%
10%
14%
56%
64%
54%
66%
54%
32%
33%
45%
35%
26%
65%
65%
83%
85%
27%
18%
15%
15%
16%
14%
11%
13%
57%
57%
36%
32%
41%
65%
66%
63%
70%
68%
76%
89%
86%
86%
84%
83%
76%
79%
27%
14%
21%
21%
22%
20%
37%
6%
14%
19%
15%
18%
15%
18%
11%
15%
14%
17%
9%
21%
11%
10%
8%
7%
11%
13%
22%
17%
66%
65%
64%
57%
54%
45%
33%
32%
30%
31%
31%
34%
44%
47%
66%
61%
43%
71%
50%
84%
82%
71%
89%
100%
23%
12%
33%
24%
17%
14%
18%
8%
18%
0%
16%
11%
8%
9%
50%
7%
42%
29%
23%
25%
59%
40%
46%
38%
80%
33%
36%
29%
41%
0%
66%
70%
55%
84%
79%
86%
23%
22%
17%
15%
11%
15%
16%
7%
11%
9%
30%
33%
58%
32%
54%
34%
24%
33%
66%
65%
61%
43%
83%
85%
84%
97%
22%
23%
24%
18%
15%
14%
12%
8%
16%
13%
10%
12%
13%
11%
13%
8%
57%
58%
52%
53%
33%
35%
31%
34%
58%
61%
71%
86%
63%
62%
67%
69%
66%
67%
65%
80%
65%
83%
77%
52%
60%
61%
47%
54%
63%
89%
78%
85%
73%
63%
87%
60%
95%
84%
83%
84%
83%
90%
77%
76%
88%
72%
84%
95%
87%
84%
5%
21%
19%
13%
53%
24%
33%
16%
20%
13%
20%
21%
17%
17%
25%
23%
30%
27%
35%
33%
23%
14%
20%
13%
27%
0%
10%
17%
21%
21%
13%
25%
4%
8%
14%
33%
13%
20%
14%
31%
33%
9%
20%
20%
13%
20%
40%
20%
33%
14%
13%
15%
27%
9%
12%
5%
17%
13%
11%
11%
0%
21%
15%
15%
16%
7%
17%
33%
9%
29%
22%
8%
14%
0%
9%
6%
21%
6%
18%
13%
16%
15%
6%
13%
54%
59%
55%
48%
56%
58%
78%
44%
65%
58%
61%
48%
57%
54%
58%
67%
46%
56%
68%
55%
59%
48%
39%
47%
17%
55%
25%
29%
29%
23%
39%
56%
28%
32%
24%
42%
27%
36%
44%
43%
5%
30%
The Macro View on Micro Units
Reasons Not Interested
in Micro Unit
Percentage of responses
Conventional renters
Age Range
Under 25
25–34
35–44
45–54
55–64
65+
Apartment Floor Plan
Studio/efficiency
1 bedroom
2 bedroom
3 bedroom
Other
Living Arrangement
Single living alone
Single with children
Spouse/partner
Spouse/partner with children
Living with roommate
Gender
Male
Female
Annual Household Income
Less than $25,000
$26,000–$40,000
$41,000–$50,000
$51,000–$74,000
$75,000–$100,000
$101,000–$150,000
More than $150,000
Primary Method of Transportation
Bicycle
Car
Other
Public transit
Walking
Car Ownership
No
Use a shared-car service
Yes
Pet Ownership
No pets
Dog(s)
Cat(s)
Other
Primary Occupation
Accounting
Banking/finance
Construction/engineering/architecture
Consulting
Defense
Education/training
Energy
Entertainment/media
Food/beverage/hospitality
Government
Insurance
Legal
Medical/biotech
Nonprofit or religious
Real estate
Retail
Student
Technology
Telecommunications
Transportation
Other
Reasons Not Interested in Micro Unit
Compact bathroom
37%
Compact kitchen
43%
Expecting need for
more space
19%
31%
39%
35%
37%
39%
42%
41%
44%
38%
44%
41%
45%
14%
20%
16%
22%
14%
16%
76%
76%
74%
73%
81%
79%
53%
63%
57%
62%
61%
60%
60%
53%
50%
60%
55%
45%
57%
63%
59%
62%
71%
65%
30%
37%
37%
44%
38%
32%
42%
43%
45%
46%
18%
16%
20%
22%
33%
51%
77%
75%
76%
75%
61%
58%
62%
65%
50%
54%
55%
56%
63%
46%
56%
63%
62%
62%
58%
38%
38%
39%
33%
32%
41%
43%
49%
38%
35%
13%
26%
22%
26%
19%
76%
77%
74%
74%
74%
60%
61%
60%
64%
55%
56%
49%
57%
55%
57%
64%
52%
66%
57%
68%
37%
37%
42%
43%
18%
19%
75%
76%
63%
58%
58%
54%
60%
64%
39%
36%
32%
39%
34%
41%
39%
40%
40%
40%
46%
41%
43%
43%
20%
22%
20%
18%
20%
19%
19%
80%
73%
77%
75%
71%
78%
74%
55%
60%
60%
61%
59%
63%
59%
51%
50%
54%
54%
57%
64%
54%
58%
58%
59%
60%
63%
70%
62%
38%
37%
22%
34%
50%
43%
38%
22%
39%
50%
19%
15%
22%
15%
19%
76%
69%
67%
73%
63%
62%
53%
22%
56%
50%
56%
53%
78%
48%
50%
63%
61%
56%
63%
50%
38%
34%
37%
43%
44%
35%
19%
20%
17%
76%
73%
72%
61%
56%
58%
56%
59%
54%
62%
63%
61%
37%
39%
36%
43%
42%
44%
45%
51%
19%
21%
18%
29%
74%
76%
80%
86%
62%
58%
59%
57%
56%
57%
51%
71%
61%
63%
70%
74%
35%
40%
38%
37%
52%
36%
43%
41%
32%
37%
40%
42%
33%
29%
31%
45%
48%
31%
34%
40%
40%
41%
46%
43%
42%
52%
39%
48%
40%
41%
44%
40%
48%
41%
35%
35%
49%
49%
38%
38%
47%
45%
17%
21%
15%
16%
17%
9%
14%
19%
17%
24%
19%
16%
19%
32%
19%
18%
22%
16%
16%
30%
23%
83%
73%
73%
75%
83%
78%
76%
70%
68%
72%
83%
75%
74%
71%
67%
75%
86%
76%
81%
87%
76%
65%
62%
59%
66%
74%
56%
67%
57%
68%
63%
60%
65%
57%
47%
54%
72%
60%
58%
56%
63%
58%
61%
57%
58%
63%
70%
46%
62%
54%
59%
61%
52%
53%
51%
50%
48%
55%
65%
59%
44%
60%
54%
61%
61%
65%
60%
52%
65%
57%
63%
67%
66%
60%
59%
61%
44%
54%
65%
75%
63%
34%
63%
67%
The Macro View on Micro Units
Lack of separate bedroom
75%
Less living/dining space
60%
Less space to host guests
56%
Less storage space
63%
41
Hesitancy Regarding Micro Unit
Percentage hesitant/very hesitant
Conventional renters
Age Range
Under 25
25–34
35–44
45–54
55–64
65+
Apartment Floor Plan
Studio/efficiency
1 bedroom
2 bedroom
3 bedroom
Other
Living Arrangement
Single living alone
Single with children
Spouse/partner
Spouse/partner with children
Living with roommate
Gender
Male
Female
Annual Household Income
Less than $25,000
$26,000–$40,000
$41,000–$50,000
$51,000–$74,000
$75,000–$100,000
$101,000–$150,000
More than $150,000
Primary Method of Transportation
Bicycle
Car
Other
Public transit
Walking
Car Ownership
No
Use a shared-car service
Yes
Pet Ownership
No pets
Dog(s)
Cat(s)
Other
Primary Occupation
Accounting
Banking/finance
Construction/engineering/architecture
Consulting
Defense
Education/training
Energy
Entertainment/media
Food/beverage/hospitality
Government
Insurance
Legal
Medical/biotech
Nonprofit or religious
Real estate
Retail
Student
Technology
Telecommunications
Transportation
Other
42
Hesitancy Regarding Micro Unit
Lack of separate bedroom
Less living/dining space
44%
20%
Compact bathroom
20%
Compact kitchen
25%
Less space to host guests
30%
Less storage space
50%
21%
21%
20%
15%
16%
21%
33%
29%
21%
17%
18%
23%
45%
47%
44%
41%
39%
41%
18%
22%
20%
15%
24%
25%
36%
33%
26%
22%
27%
37%
47%
49%
53%
48%
48%
66%
17%
19%
21%
18%
15%
27%
26%
24%
22%
0%
23%
46%
45%
51%
43%
17%
21%
20%
19%
8%
25%
30%
33%
19%
23%
46%
52%
49%
42%
62%
19%
21%
21%
20%
18%
25%
17%
29%
24%
24%
47%
46%
37%
45%
41%
22%
21%
17%
22%
17%
30%
31%
29%
22%
33%
53%
46%
51%
39%
48%
14%
24%
19%
29%
42%
45%
18%
22%
29%
31%
43%
55%
19%
22%
22%
20%
13%
18%
21%
23%
26%
25%
29%
23%
23%
18%
40%
48%
49%
45%
41%
36%
42%
23%
20%
24%
18%
18%
20%
21%
27%
33%
33%
31%
30%
28%
26%
44%
48%
60%
48%
51%
53%
42%
20%
18%
7%
20%
29%
24%
29%
36%
22%
33%
44%
41%
36%
42%
43%
20%
23%
8%
22%
50%
29%
38%
36%
25%
33%
50%
51%
29%
49%
86%
20%
14%
20%
25%
20%
23%
44%
37%
43%
20%
29%
20%
30%
31%
31%
51%
57%
42%
20%
18%
19%
10%
25%
24%
25%
27%
42%
44%
48%
40%
20%
18%
22%
13%
30%
30%
31%
23%
48%
52%
59%
53%
14%
24%
17%
26%
6%
23%
8%
13%
23%
12%
29%
15%
25%
23%
15%
20%
25%
18%
15%
12%
19%
24%
20%
20%
31%
18%
36%
42%
30%
26%
23%
24%
22%
28%
19%
25%
21%
21%
29%
21%
20%
18%
37%
37%
53%
38%
47%
41%
50%
33%
49%
45%
38%
48%
54%
44%
38%
32%
42%
41%
57%
54%
41%
17%
24%
19%
21%
6%
26%
17%
22%
21%
24%
15%
26%
24%
13%
10%
15%
16%
19%
19%
24%
19%
27%
25%
33%
31%
24%
43%
50%
36%
27%
27%
29%
33%
30%
58%
22%
23%
39%
27%
19%
28%
21%
45%
46%
54%
44%
44%
58%
42%
59%
49%
49%
60%
48%
54%
58%
44%
41%
48%
45%
57%
44%
49%
The Macro View on Micro Units
Importance of Factors in
Micro-Unit Rental Decision
Percentage important/very important
Conventional renters
Age Range
Under 25
25–34
35–44
45–54
55–64
65+
Apartment Floor Plan
Studio/efficiency
1 bedroom
2 bedroom
3 bedroom
Other
Living Arrangement
Single living alone
Single with children
Spouse/partner
Spouse/partner with children
Living with roommate
Gender
Male
Female
Annual Household Income
Less than $25,000
$26,000–$40,000
$41,000–$50,000
$51,000–$74,000
$75,000–$100,000
$101,000–$150,000
More than $150,000
Primary Method of Transportation
Bicycle
Car
Other
Public transit
Walking
Car Ownership
No
Use a shared-car service
Yes
Pet Ownership
No pets
Dog(s)
Cat(s)
Other
Primary Occupation
Accounting
Banking/finance
Construction/engineering/architecture
Consulting
Defense
Education/training
Energy
Entertainment/media
Food/beverage/hospitality
Government
Insurance
Legal
Medical/biotech
Nonprofit or religious
Real estate
Retail
Student
Technology
Telecommunications
Transportation
Other
Cafés
Entertainment
Grocery store
Gym
49%
53%
88%
56%
46%
52%
49%
45%
49%
53%
57%
60%
56%
45%
35%
42%
92%
88%
88%
88%
85%
84%
65%
49%
46%
45%
58%
52%
54%
49%
60%
75%
51%
37%
57%
33%
48%
Neighborhood Amenities
Public transit
Recreation
Restaurant/bars
Retail centers
41%
46%
68%
52%
70%
64%
53%
53%
41%
29%
40%
42%
42%
37%
38%
46%
38%
49%
51%
46%
38%
40%
73%
72%
69%
61%
61%
61%
44%
49%
58%
52%
52%
71%
90%
87%
87%
95%
67%
64%
55%
55%
60%
58%
66%
38%
38%
42%
25%
48%
44%
46%
46%
67%
73%
69%
65%
69%
75%
40%
53%
52%
58%
82%
52%
39%
57%
52%
58%
87%
86%
90%
85%
92%
55%
46%
57%
55%
66%
36%
39%
49%
42%
46%
44%
42%
47%
56%
47%
67%
55%
74%
58%
75%
54%
53%
54%
54%
46%
48%
49%
54%
51%
85%
90%
56%
56%
38%
42%
47%
45%
68%
67%
47%
56%
39%
39%
48%
48%
58%
60%
67%
52%
50%
50%
50%
64%
56%
52%
88%
87%
87%
89%
90%
87%
83%
54%
47%
53%
60%
65%
55%
70%
39%
38%
32%
35%
46%
50%
54%
40%
39%
45%
44%
53%
52%
54%
59%
62%
66%
67%
76%
76%
77%
41%
48%
54%
55%
60%
52%
45%
48%
60%
43%
64%
29%
54%
53%
36%
42%
29%
87%
96%
100%
88%
71%
56%
68%
43%
57%
14%
33%
99%
64%
75%
43%
47%
44%
50%
39%
29%
67%
73%
79%
68%
43%
53%
45%
36%
41%
71%
49%
72%
49%
53%
53%
48%
88%
97%
88%
56%
63%
60%
34%
94%
74%
46%
48%
41%
68%
84%
67%
52%
50%
52%
47%
51%
59%
37%
52%
55%
59%
43%
87%
90%
96%
80%
59%
51%
49%
55%
41%
38%
41%
47%
45%
50%
42%
59%
67%
69%
72%
70%
51%
51%
63%
53%
44%
49%
43%
63%
56%
45%
55%
55%
41%
48%
42%
65%
52%
59%
72%
46%
45%
55%
45%
25%
48%
50%
52%
51%
51%
56%
47%
55%
67%
49%
53%
53%
50%
56%
55%
71%
49%
49%
52%
40%
48%
54%
82%
91%
84%
88%
69%
87%
91%
91%
89%
92%
84%
87%
87%
86%
97%
79%
85%
90%
90%
92%
89%
41%
61%
55%
77%
41%
55%
64%
63%
50%
61%
53%
48%
61%
43%
69%
45%
67%
59%
45%
50%
52%
36%
52%
34%
65%
41%
35%
45%
52%
27%
47%
16%
39%
40%
52%
41%
46%
48%
42%
45%
25%
35%
39%
49%
50%
65%
29%
47%
82%
58%
35%
46%
53%
48%
47%
48%
63%
33%
42%
42%
47%
40%
44%
75%
76%
70%
71%
78%
58%
73%
79%
61%
70%
84%
82%
65%
79%
84%
60%
65%
65%
60%
67%
65%
44%
52%
45%
34%
61%
53%
27%
61%
49%
56%
58%
52%
61%
59%
78%
51%
39%
42%
55%
54%
55%
The Macro View on Micro Units
43
Importance of Factors in
Micro-Unit Rental Decision
Percentage important/very important
Conventional renters
Age Range
Under 25
25–34
35–44
45–54
55–64
65+
Apartment Floor Plan
Studio/efficiency
1 bedroom
2 bedroom
3 bedroom
Other
Living Arrangement
Single living alone
Single with children
Spouse/partner
Spouse/partner with children
Living with roommate
Gender
Male
Female
Annual Household Income
Less than $25,000
$26,000–$40,000
$41,000–$50,000
$51,000–$74,000
$75,000–$100,000
$101,000–$150,000
More than $150,000
Primary Method of Transportation
Bicycle
Car
Other
Public transit
Walking
Car Ownership
No
Use a shared-car service
Yes
Pet Ownership
No pets
Dog(s)
Cat(s)
Other
Primary Occupation
Accounting
Banking/finance
Construction/engineering/architecture
Consulting
Defense
Education/training
Energy
Entertainment/media
Food/beverage/hospitality
Government
Insurance
Legal
Medical/biotech
Nonprofit or religious
Real estate
Retail
Student
Technology
Telecommunications
Transportation
Other
44
On-site Amenities
Grill
43%
Laundry
room
83%
Living room
area on
each floor
43%
Pet
services
29%
Pool
56%
Roof/
outdoor
space
62%
74%
81%
68%
63%
57%
33%
33%
50%
44%
39%
42%
28%
85%
83%
80%
83%
88%
81%
35%
44%
42%
43%
47%
46%
28%
31%
28%
24%
31%
25%
55%
57%
56%
59%
50%
47%
64%
68%
63%
55%
56%
59%
16%
17%
21%
22%
33%
82%
69%
67%
67%
91%
45%
40%
45%
48%
58%
91%
83%
81%
85%
91%
33%
41%
45%
52%
64%
29%
28%
27%
42%
50%
49%
53%
59%
68%
75%
68%
62%
61%
65%
67%
18%
19%
20%
28%
24%
18%
21%
21%
25%
17%
69%
57%
73%
73%
74%
38%
40%
48%
56%
47%
82%
80%
87%
81%
86%
40%
53%
47%
54%
38%
25%
24%
38%
29%
33%
51%
66%
55%
65%
62%
61%
57%
67%
52%
68%
23%
28%
19%
22%
19%
20%
70%
69%
43%
43%
81%
84%
39%
45%
21%
34%
53%
58%
60%
63%
11%
12%
11%
14%
12%
21%
18%
18%
23%
24%
25%
29%
31%
37%
18%
22%
23%
20%
19%
18%
26%
12%
17%
18%
21%
20%
26%
20%
67%
61%
72%
70%
74%
72%
78%
32%
39%
46%
41%
47%
51%
50%
83%
78%
80%
83%
88%
89%
88%
39%
42%
49%
42%
45%
36%
43%
34%
28%
34%
26%
25%
32%
23%
60%
58%
62%
54%
56%
49%
49%
62%
58%
62%
58%
62%
70%
70%
30%
32%
29%
41%
0%
11%
31%
43%
32%
14%
23%
47%
14%
39%
14%
20%
24%
7%
18%
14%
19%
26%
21%
12%
14%
69%
80%
71%
70%
17%
43%
41%
50%
33%
29%
82%
93%
71%
86%
67%
44%
40%
23%
33%
33%
29%
27%
43%
23%
14%
58%
39%
54%
47%
14%
60%
72%
86%
74%
29%
22%
59%
30%
29%
50%
37%
10%
81%
22%
24%
58%
35%
20%
19%
24%
19%
29%
19%
70%
88%
67%
44%
59%
37%
83%
94%
83%
43%
42%
40%
30%
28%
25%
58%
55%
42%
62%
79%
66%
71%
76%
72%
62%
24%
23%
27%
24%
32%
26%
29%
18%
15%
10%
12%
7%
28%
22%
23%
21%
20%
24%
23%
24%
19%
17%
23%
32%
70%
71%
64%
57%
41%
49%
47%
38%
82%
86%
87%
79%
41%
47%
49%
48%
14%
72%
38%
57%
53%
67%
58%
54%
58%
72%
69%
55%
81%
60%
71%
67%
89%
78%
55%
73%
78%
76%
74%
74%
73%
72%
71%
66%
64%
72%
75%
68%
73%
18%
21%
19%
30%
25%
19%
55%
12%
17%
21%
33%
17%
27%
31%
29%
13%
28%
25%
35%
18%
25%
37%
32%
24%
35%
24%
31%
45%
31%
24%
33%
21%
4%
34%
32%
58%
22%
37%
22%
30%
24%
35%
4%
9%
7%
15%
18%
11%
36%
9%
13%
15%
16%
9%
15%
20%
16%
17%
17%
15%
15%
12%
14%
18%
30%
15%
50%
17%
25%
40%
19%
20%
31%
26%
26%
28%
34%
45%
17%
28%
24%
25%
28%
24%
4%
27%
19%
21%
22%
11%
27%
27%
16%
26%
0%
13%
22%
21%
26%
21%
28%
16%
25%
13%
27%
11%
18%
20%
29%
24%
11%
30%
18%
13%
26%
16%
22%
18%
25%
42%
12%
19%
20%
25%
8%
21%
68%
62%
73%
91%
53%
73%
64%
76%
65%
69%
79%
68%
69%
62%
90%
71%
79%
73%
85%
58%
59%
36%
45%
43%
50%
39%
42%
45%
40%
42%
37%
53%
50%
50%
43%
65%
29%
38%
39%
58%
42%
44%
79%
87%
84%
94%
76%
81%
73%
94%
81%
85%
79%
78%
80%
93%
90%
89%
76%
82%
90%
76%
82%
43%
39%
40%
56%
31%
41%
45%
45%
42%
52%
47%
24%
43%
48%
52%
40%
37%
41%
50%
36%
43%
18%
24%
26%
32%
41%
28%
18%
18%
26%
28%
26%
35%
31%
38%
26%
35%
29%
26%
25%
22%
33%
74%
61%
51%
64%
44%
47%
64%
64%
65%
49%
72%
48%
64%
72%
65%
49%
51%
48%
63%
58%
53%
61%
64%
64%
68%
47%
62%
91%
82%
58%
62%
61%
61%
67%
69%
77%
55%
62%
53%
70%
62%
56%
Assigned
parking
72%
Visitor
parking
72%
Bike rack
23%
Business
center
30%
Car rental
14%
Central
lounge
26%
Cinema
room
20%
Communal
kitchen
19%
Fitness
center
70%
55%
67%
75%
77%
85%
83%
69%
72%
70%
73%
76%
72%
17%
26%
23%
29%
19%
11%
27%
28%
33%
27%
42%
28%
10%
13%
18%
11%
18%
9%
19%
29%
26%
22%
26%
34%
20%
23%
19%
15%
24%
21%
14%
22%
19%
13%
19%
30%
56%
73%
71%
82%
92%
53%
73%
74%
79%
92%
31%
22%
23%
22%
17%
25%
28%
32%
34%
55%
19%
13%
13%
12%
25%
33%
25%
26%
25%
58%
17%
18%
22%
31%
58%
72%
82%
71%
72%
63%
73%
82%
66%
68%
73%
21%
20%
29%
29%
24%
28%
35%
33%
38%
30%
13%
12%
16%
21%
13%
24%
24%
28%
29%
30%
71%
72%
69%
74%
25%
22%
27%
33%
14%
13%
66%
70%
68%
75%
76%
68%
70%
72%
76%
77%
74%
73%
67%
54%
19%
17%
22%
21%
22%
31%
38%
30%
35%
29%
27%
32%
24%
34%
77%
30%
31%
36%
71%
76%
39%
64%
45%
83%
21%
34%
86%
27%
14%
77%
15%
39%
77%
30%
41%
70%
77%
72%
61%
82%
65%
72%
71%
94%
65%
64%
70%
72%
72%
84%
65%
75%
57%
74%
59%
61%
77%
90%
76%
75%
The Macro View on Micro Units
Importance of Factors in
Micro-Unit Rental Decision
Percentage important/very important
Conventional renters
Age Range
Under 25
25–34
35–44
45–54
55–64
65+
Apartment Floor Plan
Studio/efficiency
1 bedroom
2 bedroom
3 bedroom
Other
Living Arrangement
Single living alone
Single with children
Spouse/partner
Spouse/partner with children
Living with roommate
Gender
Male
Female
Annual Household Income
Less than $25,000
$26,000–$40,000
$41,000–$50,000
$51,000–$74,000
$75,000–$100,000
$101,000–$150,000
More than $150,000
Primary Method of Transportation
Bicycle
Car
Other
Public transit
Walking
Car Ownership
No
Use a shared-car service
Yes
Pet Ownership
No pets
Dog(s)
Cat(s)
Other
Primary Occupation
Accounting
Banking/finance
Construction/engineering/architecture
Consulting
Defense
Education/training
Energy
Entertainment/media
Food/beverage/hospitality
Government
Insurance
Legal
Medical/biotech
Nonprofit or religious
Real estate
Retail
Student
Technology
Telecommunications
Transportation
Other
Bathtub
61%
Built-in
Dishwasher
closet/drawers
82%
71%
Flat-screen
TV
42%
Four-burner
stove
75%
Full-size
kitchen sink
75%
Unit Features
Full-size
High ceilings Juliet balcony
refrigerator (nine feet+)
77%
49%
41%
Oversized
windows
49%
Space
partitions
53%
Storage
space
81%
Washer and
dryer
86%
56%
58%
63%
63%
61%
73%
80%
83%
83%
83%
82%
80%
65%
75%
71%
63%
74%
67%
32%
38%
42%
44%
56%
50%
73%
79%
78%
65%
69%
83%
75%
76%
77%
67%
82%
76%
81%
76%
81%
72%
82%
74%
42%
51%
51%
47%
48%
47%
25%
41%
41%
48%
46%
47%
45%
48%
51%
45%
55%
52%
47%
55%
51%
54%
53%
49%
77%
76%
82%
83%
87%
95%
82%
84%
87%
88%
92%
86%
52%
60%
62%
64%
67%
89%
84%
79%
82%
92%
72%
70%
69%
79%
80%
39%
42%
41%
38%
67%
74%
75%
73%
82%
83%
73%
75%
74%
78%
75%
68%
78%
78%
81%
75%
59%
47%
49%
53%
33%
43%
40%
41%
41%
50%
62%
46%
49%
50%
42%
52%
51%
54%
56%
58%
80%
81%
80%
84%
83%
76%
87%
87%
85%
82%
60%
72%
62%
66%
56%
83%
78%
85%
80%
79%
70%
74%
72%
70%
68%
43%
39%
40%
55%
35%
73%
76%
76%
78%
76%
75%
76%
79%
73%
73%
77%
83%
79%
79%
75%
49%
45%
50%
49%
50%
42%
44%
42%
36%
38%
48%
43%
53%
47%
49%
52%
56%
58%
47%
51%
80%
79%
86%
73%
80%
88%
87%
85%
85%
82%
55%
64%
80%
84%
68%
71%
44%
39%
70%
78%
71%
78%
75%
79%
50%
48%
38%
44%
45%
51%
46%
58%
75%
84%
81%
89%
74%
73%
62%
57%
65%
51%
35%
80%
81%
81%
82%
84%
84%
87%
67%
67%
70%
71%
70%
74%
78%
38%
39%
41%
41%
44%
44%
51%
74%
80%
80%
71%
80%
72%
54%
80%
79%
78%
69%
77%
73%
75%
81%
83%
77%
75%
80%
70%
72%
46%
49%
48%
46%
50%
49%
61%
39%
42%
39%
39%
49%
34%
38%
40%
47%
49%
44%
52%
52%
63%
46%
52%
54%
49%
59%
57%
48%
76%
82%
85%
77%
86%
76%
77%
86%
87%
90%
84%
86%
82%
87%
62%
48%
46%
48%
71%
82%
88%
71%
73%
71%
70%
78%
57%
59%
43%
42%
41%
50%
27%
29%
74%
80%
86%
58%
100%
75%
75%
86%
66%
71%
78%
79%
71%
59%
86%
48%
50%
36%
55%
57%
41%
35%
50%
34%
71%
47%
59%
57%
48%
57%
53%
57%
21%
52%
43%
81%
82%
57%
75%
86%
87%
83%
64%
82%
86%
62%
39%
55%
82%
94%
82%
70%
70%
72%
42%
25%
45%
75%
81%
71%
76%
82%
71%
78%
67%
78%
49%
58%
47%
41%
45%
35%
48%
81%
44%
53%
67%
49%
81%
91%
74%
87%
79%
82%
62%
58%
54%
63%
82%
83%
83%
76%
70%
74%
71%
70%
43%
42%
37%
33%
76%
72%
77%
57%
77%
72%
75%
60%
79%
75%
76%
63%
51%
48%
42%
37%
41%
42%
41%
34%
47%
52%
55%
30%
52%
52%
58%
37%
80%
80%
88%
87%
85%
89%
87%
90%
70%
48%
52%
62%
61%
60%
55%
64%
73%
62%
37%
65%
59%
62%
62%
75%
67%
49%
70%
61%
66%
82%
80%
75%
86%
72%
80%
82%
91%
83%
86%
84%
83%
83%
97%
90%
88%
81%
81%
85%
79%
80%
71%
71%
65%
80%
72%
64%
82%
82%
73%
74%
53%
74%
77%
73%
77%
60%
65%
73%
65%
58%
68%
43%
47%
39%
46%
50%
34%
64%
42%
45%
43%
32%
35%
38%
55%
45%
30%
44%
35%
55%
52%
47%
71%
73%
68%
88%
56%
81%
82%
88%
83%
72%
63%
81%
76%
66%
81%
77%
72%
69%
85%
75%
74%
71%
65%
74%
83%
50%
76%
82%
79%
80%
72%
63%
78%
79%
70%
68%
80%
74%
75%
95%
67%
78%
81%
65%
75%
86%
83%
80%
82%
76%
86%
76%
78%
78%
81%
60%
73%
79%
78%
74%
90%
71%
79%
52%
45%
49%
57%
33%
45%
45%
50%
46%
52%
58%
52%
49%
41%
71%
56%
43%
50%
60%
42%
46%
39%
30%
40%
49%
41%
39%
55%
47%
40%
49%
37%
45%
39%
41%
45%
35%
38%
43%
50%
29%
45%
43%
44%
56%
55%
47%
44%
55%
67%
45%
49%
42%
50%
47%
57%
61%
32%
50%
54%
45%
48%
48%
39%
47%
51%
53%
56%
55%
82%
61%
54%
62%
37%
61%
47%
50%
55%
54%
46%
51%
60%
46%
56%
82%
74%
75%
69%
83%
80%
82%
94%
79%
86%
74%
96%
80%
90%
84%
80%
69%
76%
80%
75%
87%
86%
75%
82%
83%
83%
86%
90%
97%
90%
86%
89%
91%
91%
93%
87%
81%
85%
83%
95%
75%
86%
The Macro View on Micro Units
45
Satisfaction with Micro Unit
Mean score
Renewal Intentions
Micro-unit renters
Kingsley Index
Overall satisfaction
3.88
3.97
Definitely would not
13%
9%
Renewal intentions
3.05
3.53
Probably would not
22%
11%
Community recommendation
3.90
4.04
Unsure
23%
23%
Value for amount paid
2.91
3.53
Probably would
29%
33%
Community management
3.99
4.06
Definitely would
12%
24%
Community amenities
3.96
3.86
Floor plan/design and layout
3.70
4.12
Apartment features and finishes
3.96
3.72
Location
4.49
4.38
Sense of community
3.06
3.80
Micro-unit renters
Importance in Initial Lease Decision
Micro-Unit Renters
Renewal Decision Factors
Distribution of responses
Percentage high priority/very high priority
Micro-unit renters
Percentage responded
Unlikely to
renew
Unsure
Likely to renew
Ability to live alone
71%
Access to transportation
3%
4%
41%
Assigned parking
32%
Apartment features/finishes
20%
17%
59%
Common areas/amenities
32%
Brand reputation
3%
0%
10%
Floor plan/layout
42%
Building upkeep
14%
0%
32%
Internet/wi-fi services
54%
Community appearance
0%
0%
34%
In-unit storage
25%
Community features
6%
9%
37%
Location
97%
Community management
20%
4%
29%
Neighbors with similar lifestyles
20%
Community’s green practices
6%
0%
10%
Pets allowed
26%
Home purchase
3%
9%
2%
Price
86%
Length of lease
11%
13%
15%
Proximity to neighborhood amenities
73%
Location
17%
13%
95%
Proximity to public transit
62%
Overall sense of community
9%
4%
17%
Proximity to work/school
78%
Parking
20%
13%
22%
Quality of finishes
52%
Pet policy
9%
4%
10%
Sense of community
27%
Quality of community
17%
9%
37%
Sustainability practices
29%
Relocation/transfer
11%
35%
7%
Visitor parking
21%
Rental rate
77%
70%
46%
Security
6%
0%
41%
Space requirements
31%
35%
5%
46
Kingsley Index
The Macro View on Micro Units